VC cash in Aussie startups reaches new high

Venture capital (VC) investments in Australian startups has hit a record US$1.23 billion in the 2018/19 financial year, according to KPMG.

“Venture capital investment in Australia has jumped by US$1 billion since the 2012/2013 financial year, when just US$165 million was recorded,” according to Amanda Price, head of KPMG Australia High Growth Ventures.

“The success of businesses like Atlassian – which if it was listed in Australia would be one of the top ten companies (by value) on the ASX – shows the potential of startup investment to change the shape of Australia’s future economy.

“As the global figures show, we are in a global innovation race, so there will always be the need for more capital to support smart Australian founders,” she said.

Between April and June 2019, $120 million of startup investment was recorded in Australia, according to KPMG’s Venture Pulse Q2 2019, the quarterly global VC trends report.

According to the report, the number of deals, at 17, was down on the last quarter (23), when investment totalled $148.4 million.

Globally, overall VC investment held steady over the April to June 2019 quarter, reaching $52.7 billion.

VC deal volume declined for the fifth consecutive quarter, reaching only 3,855 deals, as high valuations and fierce competition – particularly at the seed stage ? combined to produce an evening in the pace of deal-making, the report said.

“The past 12 months has seen Australia surpass previous milestones when it comes to investment in startups,” Price said.

“We continue to see greater amounts raised by later stage startups, with businesses like Airwallex and Canva raising significant later stage rounds.

“There was some fall off in deal size and volume over the first six months of the year of 2019, something that could be attributed to a pause as investors considered the implications of the Australian federal election.

“However, we’ve also seen Australian VCs close large funds in the same period which would suggest we can expect to see the growth trend of startup investment continue,” she added.

Meanwhile, the report said global trends to watch include the push towards a smaller number of late stage deals is expected to continue globally. This could affect the ability of some high-quality early stage companies to attract funding.

But AI is likely to buck this trend given its almost unlimited potential to cause industry disruption – and the significant amount of attention it is being given by corporate investors, the report said.

Meanwhile, Atlas Advisors executive chairman, Guy Hedley, said Australia must boost its incentives for venture capital and research and development if the nation is to keep up with its global competitors in medical, scientific and technological innovation.

Atlas Advisors Australia is a funds manager and investment advisory business, operating between China and Australia.

Hedley said ongoing uncertainty concerning the future of the RD tax incentive was creating an unpredictable environment for venture capital and hampering the efforts of Australia’s next generation start-ups.

He said unfavourable visa settings including a handbrake on the Significant Investor Stream were also obstructing the ability of start-ups to attract the necessary venture capital to take their innovations to the next stage.

“Without foreign investment, many of Australia’s innovations in medicine, science and technology could languish at the concept stage.

“The Australian Government must outline a concrete plan to support innovation, lest the nation risks losing support from venture capitalists, jeopardising Australia’s next-generation medical, scientific and technological breakthroughs.”