Dr Michelle Deaker

Australian venture capital firm OneVentures believes the National Commission of Audit’s recommendations to dissolve key innovation funding programs like the Innovation Investment Fund (IIF) would be a step backwards for Australia, calling on the Government to reinforce its support for these initiatives in the upcoming Federal Budget, citing innovation as the key in creating new business opportunities, higher growth and improving productivity.

The aim of the IIF program is to seed new venture capital firms to support the establishment and growth of a viable venture capital and innovation industry building infrastructure and capacity in the sector. Importantly, OneVentures notes that the program is not a grant but held by treasury on capital account with venture fund managers to return capital to the Government as investments are realised.

OneVentures’ first fund is a key beneficiary of the Australian Government’s IIF, demonstrating firsthand the crucial role Government can play in investing in the future of Australia. The firm is now in market for a new $100M fund with its Fund I being highly regarded as a portfolio of quality assets by investors.

The OneVentures Innovation Fund raised $40 million, including $20 million of IIF funding, allowing the firm to make investments into emerging Australian companies operating within the technology and life sciences space. The fund was able to launch just after the GFC, leveraging the benefit of the IIF program for private investors. Through the IIF Program, OneVentures has also been able to attract and repatriate some highly experienced entrepreneurs and business leaders returning from overseas into Australian VC management

According to OneVentures’ Managing Director and CEO, OneVentures may not have become the established firm it is today without the IIF Program.

“Innovation funding programs like the IIF are integral for the venture capital industry in seeding new funds and creating the new industries of the future, and its removal would reduce Australia’s global competitiveness in the long run,” Dr Deaker said.

“Government funding programs foster the broader investment community and the IIF model where the government matches private investor capital, sharing risk and taking a low capped return, encouraging capital from institutions and high net worth individuals to the venture capital asset class”

Alongside the $40 million Innovation Investment Fund, OneVentures has run a co-investment model where private investors in the Fund can choose investments they prefer and provide additional capital where a funding round is larger than what the fund can support. The IIF fund laid the platform with OneVentures raising an additional $40 million in capital to support technology start-ups with strong market potential through co-investments and syndicated funding largely from offshore. The quantum of funding has therefore effectively doubled into the economy and OneVentures expects the number to be far greater before the end of fund life.

Emerging companies which OneVentures has been able to successfully support include medical electronic information system Charmhealth, nanoneedle vaccine technology developer Vaxxas and adaptive e-learning platform Smart Sparrow.

“The multiplier effect of the government support is clearly visible when you look at OneVentures Innovation Fund through the additional capital raised into our companies via co-investment and syndication,” Dr Deaker said. “In the medium to long term, the quantum of new jobs in potentially new emerging industries generated through this program for the economy represents a strong case for Government support. The program also ensures that the country benefits from public financed R&D with six of our nine portfolio companies originating from R&D in Australian universities and research institutions.

“Importantly, this program is not a grant and the investment by the Government is on capital account, to be returned in the future as investments are realised by IIF fund managers,” she said. “Our first Fund has already returned early capital to the Government with that investment providing an internal rate of return of 28% to investors. The Fund also has a carrying value of investments at approximately 2x just 4 years into its investment cycle.”

OneVentures launched its Innovation and Growth Fund II in March this year, seeking to raise $100 million for institutional investors and high net worth individuals, to invest in start-ups through to emerging high growth companies.

“The IIF is part of a structure currently in place to aid a venture capital firm’s fundraising process, and contrary to the National Commission of Audit report, I believe the Government will be looking to develop this program further if it can. The Liberal government originally developed the program recognising that it helps to provide the necessary oxygen to build the new economy, encouraging private sector investment, driving growth companies and fuelling job creation to support Australia’s future,” Dr Deaker concluded.

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