SA govt puts $50m venture capital fund under review


Justin Hendry
Administrator

The South Australian government has commissioned an independent review of the state’s venture capital fund, which has delivered $27 million in funding to early-stage companies over the past six years.

Melbourne-based management consulting firm Strategic Project Partners has been drafted in for the review from mid-January to the beginning of May, according to the South Australian tendering website. It will be paid just under $240,000 for the work.

The SA Venture Capital Fund (SAVCF) is South Australia’s government-backed co-investment fund, targeting pre–Series A and Series A investment in local startups in areas like space, cybersecurity, defence and clean energy.

The fund was set up by the South Australian Government Financing Authority (SAFA) in July 2017 for an initial term of 15 years to improve research commercialisation outcomes and support local startups.

It followed a 2016 report that found a “financing gap” for early stage companies in the state, with “ad hoc” angel investment  and “virtually no active venture capital activity in South Australia”, despite there being a “reasonable amount of entrepreneurial activity”.

SA Innovation Challenge. Credit: City of Adelaide

The $50 million fund has invested $27.1 million in ten companies with “high growth and export potential” since it was created, leaving $21.67 million available over the next nine years. In March 2020, that figure sat at $6.2 million.

According to PitchBook, the fund has made investments in local startups Fivecast and Fleet Space Technologies, as well as Perth-based climate technology startup Rumin8, which also has the backing of Bill Gates’s Breakthrough Energy Ventures.

Pearler, a software startup that uses artificial intelligence to automate the handling of business questionnaires, is the latest company to secure funding through the fund, picking up $330,000 in pre-seed funding in September last year.

Only private companies with less than $250 million assets can access the fund. Half of the company’s assets and staff are also expected to be located within South Australian 12 months from the initial investment date.

Amid a changing venture capital landscape, the independent review will seek to assess SAVCF’s investment portfolio, investment strategy and co-investment requirements to determine whether it remains appropriate.

As part of the review, Strategic Project Partners will rate the performance of SAVCF’s fund manager Artesian Venture Partners, which has held the gig since 2020. The government dropped Blue Sky Venture Capital as the manager in August 2019.

The review will also seek to understand whether the fund has “been able to improve the venture capital ecosystem in South Australia” since the 2016 report by Redfire Consulting Group, and “what could or should be done differently”.

According to the original tender for the work, the Strategic Project Partners will be tasked with drafting an initial report within four weeks of the contract (mid-February), before delivering a final report that will be informed by consultations with stakeholders.

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