A record number of superannuation funds have contributed to AirTree Ventures’ latest $275 million fund, with the VC firm bringing in six institutional investors.
AirTree Ventures announced the close of a new fund on Tuesday, one of the largest ever venture capital funds aimed at technology to be raised in Australia.
These include existing AirTree backers AustralianSuper and Sunsuper along with Statewide Super and three others that declined to be named, the most funds that have contributed to a VC fund in Australia ever.
There has been fierce debate over the role in those large superfunds supporting local innovation and tech companies.
But AirTree Ventures founder Daniel Petre said this debate was overblown, and the VC sector needs to prove itself to bring the super industry on board.
“The commentary around superfunds’ involvement has been a bit unreasonable – demanding them to invest is ridiculous. It’s reasonable for the investment decisions involving the super of hard-working Australians to be around what makes sense,” Mr Petre told InnovationAus.com.
“It only makes sense to invest in VC if venture firms can show proxy data that we can invest in companies successfully in Australia and provide a return to investors. Then the superfunds will respond.”
The strength of AirTree’s first two portfolios helped to bring the new institutional investors on board, Mr Petre said.
“It’s all going the right way. Superfunds are looking to invest in VC, and they should do it if it makes sense – they shouldn’t be forced to,” he said.
Having the superfunds on board makes the VC fund more accountable too, he said.
“I feel more humbled than excited. I’m more concerned to do the right thing moving forward for our investors, who now include a whole lot more average Australians. We need to continue to perform and do the right job. This isn’t the finishing line, this is the start of the race,” Mr Petre said.
The latest AirTree fund could have been much bigger too, with Mr Petre saying that while it was still oversubscribed, the firm made a deliberate decision to keep it to a similar size as the last fund.
“We intentionally limited the fund to a similar size as last time. That forces you to have discipline in investing that you might lose if you start raising bigger amounts with no clear investment capability,” he said.
“We’re not going to suddenly wake up and be the best biotech investors. We’re going to stick to what we know, and that’s predominantly software.”
When AirTree raised its first, $60 million fund in 2014, it was regarded as a watershed moment for the Australian sector.
At the time, there was only a handful of VC funds in the entire country, Mr Petre says. Now there are at least 70.
“It’s extraordinary the number of VC firms and the amount of money coming into it. And the cadence of money coming in is matched with the cadence of quality investments. We’re in really good shape,” he said.
“The landscape of companies worth more than $100 million is much broader than it was six years ago. We’re not just raising a bunch of money, a lot of quality sustainable companies have come up.”
In terms of government support, Mr Petre said the two biggest concerns are skills and the research and development tax incentive.
“It’s exactly the same stuff we’ve been pleading with them for in the past. The R&D scheme is still a complete mess, brought about by a change in the interpretation of the R&D laws. That has led to incredible stress on startup founders, and that’s just appalling,” he said.
“R&D spending is declining anyway, and for the government to pull the rug out of the R&D sector is mind-numbing. That needs to be fixed – it’s still a big issue. The two big levers remain the treatment of R&D and skills.”
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