Jelix Ventures founder and chief executive Andrea Gardiner says the biggest challenge for pre-revenue and early-revenue startups in Australia remains the difficulty in securing funding, despite the huge volumes of new money that has washed into the venture capital sector.
While the federal government’s Early Stage Venture Capital Limited Partnerships (ESVCLP) program had attracted billions into the innovation ecosystem in recent years, a critical funding gap remains at the earliest stages of a startup’s journey to success.
The challenge for startup companies in Australia right now? “For the really early ones, I think it’s fundraising, because of the substantial and growing funding gap,” Ms Gardiner says.
The success of the ESVCLP has meant deal sizes have grown dramatically on the back of dramatic growth in the size of the venture funds being raised.
Australia’s larger VC funds have beefed up and the size of the cheques they write has swelled as well. It seems like a nice problem to have, except that it has created a more dramatic hole in the funding landscape for the earliest stage companies.
“[The bigger VCs] have been forced up the food chain, in a sense, to write bigger cheques,” Ms Gardiner says. “Lots of them started with tens of millions under management and now they’ve got hundreds of millions of dollars under management, and so they can’t really afford to be writing $500k cheques.”
“They have to write millions of dollar cheques. And I think the gap that’s been created is the hardest thing [for these early-stage companies.]”
It is a thorny problem for local policymakers. The ESVCLP program has enjoyed great success by offering a capital gains tax-free incentive. This has been undeniably positive for the local ecosystem. The trick in the longer term will be in structuring an incentive that opens the spigots of investment dollars into the pre-revenue and early-revenue companies.
This has been the opportunity for Jelix Ventures, and where it has focused its attention.
Jelix on Monday said it had closed a $15 million early-stage tech fund under an ESVCLP structure, bringing to $26 million in total funds that the company now has under management. Up until now, the company has invested $11 million in 26 startups through its investor-led syndications under a variety of structures.
The pre-revenue companies remain the focus, Ms Gardiner said.
“That’s definitely our sweet spot. That’s where we have our deal flow. And that’s where we can help the most,” she said. “But the plan is to do lots of follow-on investments in the deals that we do well.”
The new Jelix ESVCLP fund is backed by high-profile investors from the heart of the startup ecosystem, including Airtree co-founder Daniel Petre, Afterpay executive Rachel Kelly, Our Innovation Fund founder David Shein, iiNet founder Michael Malone, Inquisitive CEO and Mathletics founder Tim Power, Mumbrella founder Tim Burrowes, and Audible’s Japan-based regional chief Matthew Gain.
“Our original model was to source great investment opportunities and build and lead a syndicate for each investment,” Ms Gardiner said.
“There were strong appetites to invest in early-stage tech startups, but lack of deal flow and expertise to assess the opportunity and structure terms, leading to a perfect opportunity for Jelix to fill the gap.”
Jelix has already made its first investments from the new fund, including FL0 (described as Canva for engineers) alongside Blackbird and Skip Capital, as well as quantum computing firm Quantum Brilliance and computer vision AgTech startup Bitwise Ag.
Jelix expects to invest in up to 20-25 businesses from the fund, focusing on software and deep tech servicing huge global markets. Ms Gardiner said Jelix would continue to offer co-investment opportunities with first priority to fund investors.
Jelix also announced the promotion of key staff member Alon Greenspan to investment partner. Mr Greenspan has been an active investor with Jelix since early 2018.
“It was a well-earned, short path to partnership for Alon. He is truly extraordinary,” Ms Gardiner said.
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