The NSW Government is getting into the venture capital business, announcing it is setting up a $150 million equity fund in partnership with First State Super and investment management group ROC Partners.
Called the GO NSW Equity Fund, the initiative is being set up through Jobs for NSW, which will contribute $50 million into the fund. First State will contribute an initial $100 million.
NSW Deputy Premier John Barilaro said the fund would target companies with an enterprise value of between $20 million and $50 million that are looking to significantly expand, and which had the potential to create job growth and deliver “other positive social impacts”.
The government estimates the fund would create up to 2,500 new jobs, and a further 2,400 by 2025 using recycled funds. At least $30 million of the fund – or 60 per cent of the Jobs for NSW contribution – must be directed to companies in regional NSW.
“We’re working with First State Super and ROC Partners – one of Australia’s leading specialist private equity investors – to provide capital funding to high-growth companies in exchange for a percentage of ownership,” Mr Barilaro said.
“This isn’t a loan or a grant program, but the government actually investing in businesses, by buying a stake in them. Any returns or profits generated by our equity stake will go back into the fund to help more businesses,” he said.
NSW is the first government in Australia to team up with a Super fund on a project of this kind, Mr Barilaro said, “proving we are a government that’s prepared to think outside the box.”
The fund is expected to be self-sustaining fund, with profits generated by the equity stake to be returned and reinvested into the fund to help other businesses.
NSW Finance Minister Victor Dominello said the GO NSW Equity Fund should provide a return to the state.
“Instead of just giving money out and expecting nothing in return, we go in there like the Shark Tank and we ask for a bit of equity,” NSW Finance Minister Victor Dominello told InnovationAus.com.
“Hopefully some of these companies might go on to become unicorns … and that means a win for them, a win for the government, and in the end a win for the taxpayer. At $150 million, that’s a massive injection of dollars into the ecosystem.”
The GO NSW Equity is the latest addition to a growing list of investments that are being made to the state’s startup ecosystem. The Sydney School of Entrepreneurship just opened its doors in August and the Sydney Startup Hub is due to open in early 2018.
“These are not just a series of motherhood statements. These are real dollars in terms of the Go NSW Equity Fund and they are real dollars behind the Sydney Startup Hub,” Mr Dominello said.
“Things are rapidly changing here in NSW [in the innovation ecosystem], and very much for the better.”