Dr Michelle Deaker
Leading Australian venture capital firm, OneVentures, has thrown its support behind the Federal Government’s Science and Innovation Package announced yesterday, welcoming tax incentives to stimulate early stage investing, visa reform to encourage talented entrepreneurs and STEM graduates to Australia, funding for incubators, and initiatives to buoy the number of STEM graduates and women participating in the sector.
The proposed reforms to the Early Stage Venture Capital Limited Partnerships (ESVCLPs) to increase the size of funds under management and relax the rules around the requirement to divest assets once they reach $250 million asset value are sensible and will ensure funds have sufficient scale to support capital-intensive companies in sectors such as life sciences and clean technology, and to hold them until they reach optimal value before divesting.
OneVentures says the Biomedical Translation Fund is a welcome boost for the biomedical sector, providing much-needed funding to increase the frequency of conversion of the outputs of our $9 billion per annum Research and Development (R&D) into commercial outcomes.
With more capital available for this task, there will be greater opportunity to replicate the success realised recently, with OneVentures portfolio company Hatchtech (a company developing an innovative head lice product) signing a commercialisation agreement with Dr. Reddy’s Laboratories that could return $279M to Hatchtech investors (including $100 million to OneVentures investors).
OneVentures expects that the tax incentive for investors who participate in ESVCLP funds will stimulate interest from superannuation funds and other investors to work with accredited venture capital managers.
While ESVCLPs are tax free on income and capital account, allowing investors in new ESVCLPs to receive a 10% non-refundable tax offset on capital invested during the year is a welcome initiative to help investors offset risk. ESVCLPs are good investment vehicles for venture across early and later venture funding stages.
OneVentures CEO and Managing Director, Dr Michelle Deaker said that while the startup community applauds the many initiatives that aim to unlock funding for early stage or ‘start-up’ companies, the challenge will be to work out how we boost funding to the later stages of the VC funding cycle and this initiative may help the institutional investors level of interest.
“The fact is that over the course of the last decade funding to the seed and start-up phases has increased, while funding for later stages (Series B&C) has not materially changed,” Dr Deaker said.
“This is one of the reasons OneVentures $100 million Innovation and Growth Fund II focuses on funding later stage opportunities – because to build a successful start-up ecosystem we need to start great companies, provide them with early stage support, then give them access to capital to ensure they grow into significant, global companies. We want to take the ideas boom and translate that into substantive businesses.”
Filling the entrepreneur ‘management gap’
OneVentures says the proposed Entrepreneur Visa will help attract talent to fill the ‘management gap’ that exists in Australia, where there are insufficient entrepreneurs that have serially established, grown and exited successful technology companies.
Dr Deaker cited a number of such entrepreneurs who have proven the value of bringing global experience to the local venture capital scene:
- Dr Paul Kelly, Managing Partner and head of OneVentures’ life sciences practice, has been instrumental in building a number of significant life sciences companies both within OneVentures and during the 15 years he was offshore in Cambridge, UK, and Boston in the USA. Dr Kelly began his career in Australian as a physician and clinical researcher before embarking upon a career internationally in biotechnology and commercialising biotechnology innovation. Since then he’s gone on to create over $1.3billion in value to shareholders from various companies he has either founded or led through various commercialisation phases.
- Alex Lipe, founder of Molecular Securities in New York is a successful Australian who lead the M&A team at Morgan Standley in New York, has overseen many billions in transactions and invests his time with OneVentures Australian portfolio companies helping to see them on the road to success and beyond. The partnership with Molecular Securities and OneVenturees was pivotal in the asset sale of Hatchtech.
- New OneVentures team members Dr Amir Zalcenstein, with over 12 years’ experience commercialising biotechnology from Israel, and Melissa Widner, who successfully built two enterprise and marketplace software companies in Silicon Valley and has been partner of 2 venture funds.
“A specific initiative of the Turnbull government is “Best and Brightest,” the government wants to see more of our highly skilled entrepreneurs, talented executives and investment professionals return home to help drive our new economy.
“OneVentures was fortunate to have Paul return to Australia to invest his expertise in building and growing biotech companies. People like Paul not only brought his expertise but relationships such as that with Alex,” Dr Deaker said.