A new report compiled by Australia’s peak body for venture capital (VC) and private equity (AVCAL) – ‘The Venture Capital Effect’ – reveals Australia’s VC sector has soared ahead in recent years with a record $568 million raised in 2016 – but it still remains a fraction of what is really needed to fuel innovation and create the next wave of start-up firms.
AVCAL Chief Executive Yasser El-Ansary said VC in Australia “has come of age” but cautioned that much more needed to be done to ensure Australia is able to compete with its global peers.
El-Ansary said. ”International experience shows we cannot have an innovative economy without a strong VC sector”.
Australian VC investment as a proportion of GDP is just 0.023 per cent of GDP in Australia, less than half the average for the world’s leading nations as measured by the OECD average of 0.049 per cent.
There is also a huge opportunity to boost superannuation investment into venture capital, in line with global peers, allowing all Australians to reap the rewards of major technological change.
Speaking at the launch event at Parliament House this week, One Ventures Managing Partner Anne Marie Birkill said that important policy drivers include incentives such as the Research and Development Tax Incentive and Venture Capital Limited Partnerships (ESVCLP and VCLP).
Birkill also urged the Future Fund to consider investing some of its 10 per cent VC investment, which is currently all invested overseas, within Australia. “If 10 per cent of the 10 per cent was invested in Australia it would double VC in this country,” she said.
Key highlights from the report include:
- Start-ups are the largest contributor to job creation in Australia, with VC a key source of capital and expertise;
- Australian VC is currently backing ground-breaking research including in the treatment of Parkinson’s Disease (Global Kinetics) and the delivery of needle-free vaccines (Vaxxas), which can deliver health benefits for Australians and millions worldwide;
- US research shows some of the world’s largest companies – including Apple, Alphabet (Google), and Microsoft – have been backed by VC, demonstrating the potential for VC to transform the Australian economy;
- Greater superannuation investment in VC is pivotal to Australia’s future, with limited institutional investment holding back the growth of the innovation ecosystem.
- While 2016 saw the highest volume of Australian VC fundraising ever - $568m – the US raised an incredible 97 times as much capital in the last year.
The full report can be found online.