Instreet opens the door to venture capital for sophisticated investors
Boutique investment manager, Instreet Investment has launched a new fund designed to give investors exposure to innovative start-ups. Named the Instreet Start-Up Fund, this fund also provides the potential for investors to benefit from the early stage innovation companies (ESIC) tax incentives.
The fund’s objective is to invest in early stage innovation companies that are disruptive in their industry.
Instreet Investment Managing Director George Lucas says: “This is an asset class with the potential to produce high levels of capital growth but also have the highest risk, and so is often attractive to high net worth investors.”
The fund is open to professional, wholesale and sophisticated investors. Instreet is targeting a fund size of $5 million and has set a minimum investment size of $50,000. The offer closes on 28th April 2017.
It will have a five to 10-year term and will not be listed on any securities exchange.
Lucas adds “Instreet intends to launch a new fund quarterly as there are significant opportunities in the current market. The fund has been designed to allow investors to take advantage of tax incentives provided as part of the Australian Government’s National Innovation and Science Agenda, which aims to support entrepreneurship.”
Under the ESIC rules eligible investors may receive a tax offset of up to 20 per cent of their investment in the current financial year. Also capital gains tax may not be payable on distributions when the fund manager disposes of an eligible investment.
The fund has been set up as an unregistered managed investment scheme. Each investor will hold their equitable interest in the underlying investment directly through a separate bare trust.
Instreet will tap into its network of incubator platforms and accelerators to select five to 10 start-ups that have the potential to produce high revenue growth. The fund will then invest between $250,000 and $1 million in each investee company and will target ownership of between five per cent and twenty per cent.
Lucas says, the fund will be looking for investee companies whose management has proven leadership ability, technical expertise and operating experience. Investee companies must be producing revenue or show signs that revenue is imminent.
“These companies will operate in niche or new markets that have the potential to change the traditional business landscape,” Lucas says.
He says the fund is suited to investors wanting venture capital-like exposure but who may not have the expertise or resources to undertake due diligence of direct venture capital investments themselves.
Previous early stage investments made by the fund manager’s investment team include the mobile investment platform Acorns Australia, the education website Wealth Know How, and Emerald Club, the designer of the socially responsible investment platform Emerald Wrap.