New fund to bring much needed capital to starved Australian VC sector
Elaine Stead
Blue Sky Venture Capital, a division of Blue Sky Alternative Investments Limited (ASX:BLA), is aiming to raise $30 million for a new fund in a bid to capitalise on Australia’s underpenetrated VC asset class and bring funds to the cash-starved sector.
The new fund is targeting a 30 per cent internal rate of return net of fees, and will have its first close on 22 August 2014. Blue Sky is applying for registration as an Early Stage Venture Capital Limited Partnership, meaning returns to investors will be tax exempt.
Blue Sky Venture Capital investment director Dr Elaine Stead said competition for high quality VC deals in Australia was at an 11 year low, with a mere $100 million of capital invested in 2013, compared to $29 billion in the U.S.
“There has been no better time to invest in the Australian VC market,” Dr Stead said.
“Our new fund is aiming to raise $30 million, almost a third of what was invested in Australia last year alone. This places Blue Sky in a strong position to take the pick of the best opportunities in an asset class with the potential to generate very high levels of capital growth.”
While 80 per cent of all VC investment goes into the earliest stage companies, including start ups, Blue Sky intends to focus on the underpenetrated, and lower risk late VC and early stage expansion sector.
The company is also committed to maintaining a technology and industry agnostic approach, in contrast to the wider VC market, which typically invests 80 per cent of capital in the crowded biotechnology and IT spaces.
Dr Stead said Blue Sky would invest across a diverse and balanced portfolio of deals.
“We look for validated, game changing products or technologies, which offer a global reach, rapid scalability or growth, established, experienced management teams and businesses where we believe we can genuinely add value,” she said.
Blue Sky invests in Australian and international companies from Sydney to Silicon Valley as well as in partnership with other international venture firms. The firm recently formalised a co- investment partnership with North American healthcare specialist fund, Five Corners Capital.
“We back companies that address global markets, and our investment partnerships ensure our companies have access to the expertise, capital and partnerships needed to support their growth,” Dr Stead said.
Blue Sky manages $600 million worth of assets across private equity (PE) and venture capital, hedge funds, real assets and real estate.
The PE and VC division has delivered a 16.3 per cent internal rate of return net of fees since inception to investors within its funds, far higher than the 4.9 per cent industry benchmark. Early stage investments include Mexican restaurant chain Beach Burrito Company, biotechnology company Hatchtech and online retailer Pet Circle.
