This is a long page (!) covering internet, ICT and digital media related private equity and venture capital investment in Australia and the investors that specialise in the sector. Keep scrolling down & you will find a list of the funds and their investee companies.
If you want to know more about this topic, then you are recommended to subscribe to Adrian Herbert’s excellent Australian Private Equity and Venture Capital Journal and buy his Australian Private Equity and Venture Capital Guide (17th edition 2010 – in need of a reprint). Also checkout AVCAL’s website.
1. Australian Venture Capital
In Australia there are far more private equity firms than venture capital firms, with on balance, private equity firms delivering much better returns.
The difference? Private equity firms focus on later stage businesses and larger investments. They typically have a diversified portfolio across many industry sectors and invest debt finance as well as equity finance.
Example? Archer’s Dec 2008 A$451m acquisition of MYOB . Archer is a private equity firm, not a venture capital firm. MYOB had established revenues of A$181m and the investment included A$250m of debt provided by a banking consortium. Their subsequent sale to Bain Capital (another private equity firm) for A$1.2bn in 2011 is well documented, and we will shortly see a lot of press around their 2015 IPO back on to the ASX.
Other examples include Allco’s support for IBA Health and iSoft before it was acquired by CSC, Ironbridge’s PIPE (private investment into public equity) investment into Bravura and Macquarie Capital’s investment in Nintex sold to TA Associates for around US$200m. These are examples of “private equity at work” as opposed to “venture capital investment”.
According the Australian Bureau of Statistics (ABS) the mix of private equity (“LSPE”) and VC funds in Australia is as follows:
|Number of Fund Managers by preferred stage of investment – 2012-13|
|VC only||LSPE only||Both VC & LSPE|
|Less than $10m||35||4||17||56|
|$10m to $25m||11||6||5||22|
|More than $25m||9||16||19||44|
|VC = Venture Capital and refers to the pre-seed, seed, start-up and early expansion stage of investment. LSPE = Later Stage Private Equity and refers to the late expansion, turnaround and buy-out or sale stage of investment.|
AVCAL data lists the VC funds raised by Australian Venture Capital firms as follows:
|VENTURE CAPITAL||PRIVATE EQUITY||TOTAL|
|Year||Amount (AUDm)||No. Of Funds Raising Capital||Amount (AUDm)||No. Of Funds Raising Capital||Amount (AUDm)||No. Of Funds Raising Capital|
|10 Year Total||2,065.08||25,934.99||28,000.06|
The above investment is broadly split into 35% retail, services and real estate, 30% manufacturing/transport, 16% biotech/pharmaceutical/health, 14% IT/media/electronics, 5% energy.
With reference to venture capital, investment data indicates an average of $A1m per investment in recent years. Bearing in mind a number are repeat investments into the same company, not a huge number of companies receive funding:
|YEAR||AMOUNT (AUDm)||NO. OF INV||NO. OF CO.S||NO. OF FIRMS|
- AVCAL Dealmetrics (Nov 2012) indicates that of the A$964m invested by Australian VC’s during the period FY06-FY12, A$353m (36.5%) was in the Technology and Communications sector, across 273 deals for an average investment of A$1.29m.
- We Have Met The Enemy… And He Is Us is an excellent report on “Lessons from Twenty Years of the Kauffman Foundation’s Investments in Venture Capital Funds”.
- Venture capital (VC) has delivered poor returns for more than a decade. VC returns haven’t significantly outperformed the public market since the late 1990s, and, since 1997, less cash has been returned to investors than has been invested in VC. Speculation among industry insiders is that the VC model is broken, despite occasional high-profile successes like Groupon, Zynga, LinkedIn, and Facebook in recent years.
- The Kauffman Foundation investment team analysed our twenty-year history of venture investing experience in nearly 100 VC funds with some of the most notable and exclusive partnership “brands” and concluded that the Limited Partner (LP) investment model is broken.
- Only twenty of 100 venture funds generated returns that beat a public-market equivalent by more than 3 percent annually, and half of those began investing prior to 1995. The majority of funds – 62 – failed to exceed returns available from the public markets, after fees and carry were paid.
- Only four of thirty venture capital funds with committed capital of more than $400 million delivered returns better than those available from a publicly traded small cap common stock index.
- Globally, the best years for venture capital were the 1990′s. This is when US venture capital firms delivered average returns of 35.7% per annum. Kleiner Perkin’s 1994 fund delivered 32 times the investors’ money, its 1996 fund 17 times, and the 1999, six times. In comparison, for the 10 years to 2010, US venture firms lost an average of 1.9% per annum (according to data compiled by Cambridge Associates for the National Venture Capital Association).
- Unlike the US, Australian VC fund returns data is not published. However, the 2008 AVCAL Yearbook indicated that the data is worse than for US peers. The cumulative annualised return for all VC funds, from 1985 to 2007, if aggregated into a single fund, was -1.4%, compared to a Private Equity return of 9.9%.
- As a result of the weak performance of Australian VC firms (compared to private equity firms), in Australia, there has been a “flight of capital” to the later stage private equity funds. A whole series of Australian VC funds are now exhausted, including some of the large funds raised in the early/mid 2000′s, the 2001-2008 A$130m funds of the BITS incubators and the 2002 A$107m of pre-seed funds. In addition some significant fund managers have been unable to raise new VC funds including Allen and Buckeridge (total A$280m under management; last fund being 2003 of A$51m) and Technology Venture Partners (total A$190m under management; last fund being 2001 of A$144m).
- In addition, the size of Australian VC’s is too small for some pension firms to invest in. This, plus the historically low returns means that, if they want exposure to venture capital, they often seek it through US venture capital funds.
- In recent years the federal government IIF grant program has been instrumental in maintaining the Australian venture capital industry however this was axed in May 2014 with no replacement announced.
- However, the news is not doom and gllom, and Australia has had some news funds extablished including:
|FY2014||Airtree $60m, Westpac Reinventures $50m, OneVentures Fund II $60m+|
|FY2013||Carnegie $90m incl $40m IIF, Blackbird $30m, Anacacia Capital (PE) $150m, Rampersand $6m.|
|FY2012||Southern Cross Renewable (2012 $200m; 50% gov’t money), SquarePeg, Valar NZ|
|FY2011||Carnegie $40m incl $20m IIF, Telstra Ventures $50m, One Ventures $40m incl $20m IIF, Sydney Angels Side Car $10m, Future Capital $5|
- Finally we have some new sub A$1m “micro VC’s” including Startmate, Pollenizer, Future Development Capital (2011 $5m), and Sydney Angels Side Car Fund, and some organised vehicles for high networths, including Paul Bassatt’s very active Square Peg Capital.
2. Global VC’s Investing in Australia
Our market is regularly scanned by some of the larger US and European firms looking for investments tha suit their larger funds. Other than for Peter Thiel, with Valar Ventures NZ, these firms do not have “feet on the ground” in Australia and many source their Australian deal flow through introductions and relationship networks:
- Accel Partners – Atlassian (2010 US$60m), OzForex (2010 US$80m) and 99 Designs (2011 US$35m)
- Accel KKR – PageUp 2012 A$10m
- Bain Capital’s – 2011 A$1.2bn acquisition of MYOB
- Founders Fund – US-based Urban Compass 2013 $20m
- Francisco Partners – Mincom 2007 A$315m (sold to ABB in 2011), Aconex 2008 A$107.5m (2014 ASX IPO rumoured).
- General Catalyst – Big Commerce 2011 & 2012 rounds totalling $35m
- Index Ventures – Kaggle 2011 $11m
- Insight Ventures – Campaign Monitor 2014 $266m investment (acquisition?), OzSale 2010 A$14.5m
- Revolution Growth- Big Commerce 2014 $40m
- Sequoia – LiFX led 2014 $12m round
- Spectrum Equity – iSelect 2011 30m
- Summit Partners – The Iconic 2013 $25+m
- TA Associates – Nintex 2013 US200m investment/acquisition
- Technology Crossover Ventures – Siteminder 2014 $30m
- Tenaya Capital – US-based Platfora 2014 $40m
- TRowe Price – Atlassian 2014 $150m
- Valar Ventures/Peter Thiel – Xero ($50m+), BuyReply, Scriptrock, Vend
UK European examples are much fewer but include:
- Reed Elsevier – Agworld 2014
- Rocket Internet – Society One
- Yellow Brick – Smart Sparrow 2014
Funding remains available for good plans, good teams and good intellectual property with a clear connection to the market!
3. Structure of VC’s and Private Equity Funds
- These funds exist to deliver returns to their investors, typically superannuation trustees advised by asset consultants, but also high networths.
- They are typically a partnership structure. They take a management fee (say 2.75%) of the funds invested with them & then take (say) 20% of the returns above agreed thresholds (say a 15% return, or a return linked to a public index).
- Cynics argue they are more interested in living off the management fee than over achieving on the investment return.
- They take a “spread” portfolio approach within mandate terms agreed with their investors
- Most operate on a 10 year closed fund model, but some have an open structure or a seven year model. The first year is when they start looking at new deals. They invest in new deals in years 2-5. They focus on “follow on” investments in years 3-6. They focus on protecting investments and securing exits in years 4-10.
- They start setting up their next fund within the term of their current fund. But they need to demonstrate returns to their investors to get their next fund up. If they can’t demonstrate a return, the doors close on new funds, and (over time) the “living dead” emerge.
- Whilst a little dated and out of print, read Chris Golis’ book Enterprise and Venture Capital. It’s an Australian book and focuses on the local market.
- Be aware of federal government IIF program (now axed but with some of the funds it supported still going) and also 3 tax effective structures investment groups may choose to use – VCLP, ESVCLP and Pooled Development Funds (PDF).
- You need to understand the specific model of the investor you are proposing to engage with & should talk to their investees for information. Remember, it’s not really about the money. It is what the investor will do to help you (or hinder you) that is most important! Go for the “strong relationship network” & “value-add” over a “high valuation” any day!
- You need to be familiar with PE/VC legal paperwork. Plenty has been written about it. Expect dilution, preference shares, down-round rights, veto’s over management decisions. If you want less onerous terms, aim for competitive tension. Fix the problem by having more than one party wanting to invest! Raise the money before you really need it!
4. Australian (& NZ) Tech VCs
A list of Australian VC’s and PE firms with a history and/or interest in ICT investment are listed below. Note that in addition to this, a number of other firms purely interested in medical devices (Brandon Capital and GBS Ventures) and cleantech (Cleantech Ventures).
Bear in mind that a lot of historic investment doesn’t necessarily mean a investor has money to invest – that depends on whether they have uninvested funds! An attempt has been made to track current investments (black text) and exited investments (gray text) but this may prove inaccurate.
Accede (formerly DB Capital Partners/Deutsche Bank/Ericsson Deutsche Technology Fund) – Had a serious amount under management but with no new money since the mid 2000 it is now substantially dormant. Investees included: G2 Microsystems, CEA Technologies,Conferserv, Dilithium, Finisar (formerly Engana), Enterix, ManageSoft, Redfern Photonics, Sensory Networks, TimeBase, Velocity Systems
Accretion – a secondary fund that acquires the investment interests of other investment funds; those that have to close off their funds. Tech investments they have inherited include: Clinical Solutions, Energetics, QED, Speedscan, Zeacom
Advent Private Capital – a mid tier private equity firm, that was an early investor in Cochlear, Advent does not have any tech investments at the moment, but did make more than 6 times its money when it sold the Scada Group (originally Hunter Valley Water Tech / Serck Controls)) to Schneider Electric in 2010, and when it sold SecurePay to Australia Post in 2011.
Allen & Buckeridge – ICT – historically one of our biggest tech investors with $280m under management via 4 funds. This is now exhausted with the last major fund closed in 2003 (pre-seed aside). Of particular note was the sale of investee Hitwise to Experian in 2007 for US$240m. One of its principals Roger Allen remains one of Australia’s foremost and active tech angel investors, with recent investments including Jump On It (acquired by Living Social). A&B investments include:
ActiveTorque, BT Imaging, Communicator Interactive, eKit, eServ Global, Eastern Telecommunications Philipinnes, MIG, Redfern Broadband Networks,Fultec, Redfern Polymer Optics, Aurema, 80-20, Loyalty Magic, Mantara, Next Generation Gaming, Personal Audio, Southrock, Sensory Networks, Vintela, eChoice, enikos, Hitwise (Sinewave Interactive), MicroForte, Netstar, Sententia, Wishlist, Riota, Medtamic MD, Vast Audio, Vast Systems, Viva Blue, XeroCoat, Big World.
Amwin/Champ – Amwin had one of the first IIF licences in Australia but are now as CHAMP is one of Australia’s pre-eminent “mainstream” private equity firms and a long way from their initial tech focus. Their tech IIF fund started in 1998, took in $27.5m of government money, $13.75m of private money and returned $273.2m; 9.25 times the invested capital! Bill Ferris’ book Nothiing Ventured Nothing Gained is a “must read”. Tech investments included Datacraft, Fairlight, First State Computing, Hypertec, Internet Objects, Looksmart, Protel/Altium, Seek, Gekko Systems, Maxamine, Execom. Their only current tech investment is oOh!Media.
Anacacia Capital – Mid tier private equity firm. Anacacia doesnt focus on the tech sector but does have one strong ICT investment – Appen Hill Butler (formerly Appen).
ANU Connect – Early stage $30m research commercialisation fund. ACT based. Mainly bio some ICT investment – Digitalcore, StageBitz, Synergetic.
Archer Capital – One of Australia’s premier private equity firms occaisionally dipping into the ICT sector – notably their closely fought tussle to acquire (and a acheive a great return out of ) MYOB. Their only current ICT investment is Keycorp.
Australian Capital Ventures. A division of the Hindmarsh Group focussed on the Canberra market. Has run the ACT Government’s Canberra Business Development Fund, and remains active in the Canberra market, with Michele Troni being deputy chair of Capital Angels.
Blackbird Ventures. Brand new (March 2013) $30m tech VC that has eschewed government grants and embraced recent entrepreneurs, including Atlassian’s founders Mike Cannon-Brookes and Scott Farquhar, and silicon valley investors Bill Tai and Dave McClure. Built on the back of seed investor Startmate and run out of the offices of successfull VC (and investor) Southern Cross. So far 2 investments have been made: Canva, Ninja Blocks.
Blue Cove Ventures – Boutique VC with ICT industry expertise via principal Nick McNaughton. Whilst Nick is still very active (including chair of Capital Angels) the fund has now closed. Investments: Simmersion Holdings, Windlab Systems.
CM Capital – No longer active with last fund raised in 2007 (#4, $154m). As of May 2013 the portfolio is managed by Talu Capital. Had A$245m under management through original Coates Myer IIF and Venture Trusts #3 and 4. Mainly Bio and Cleantech focus, but some ICT including: AdGent Digital, Alchemia Ltd. bCode, BioLayer, DataCastle, Dilithium Networks, DSpace, Mantara Inc, mesaPlexx, Metastatix Inc, UiActive Inc, ThreatMetrix, Universal Biosensors, Xumii.
Co-Investor – Not your typical PE or VC firm but an active “strategic block investor” into listed companies. Co-Investor raised funds in 2005 and 2008, and has a stake in a number of Australian and Asian focussed digital media companies through Asia Pacific Digital Limited including Digital Performance Group (ASX:DIG), Interface IT, Next Digital, Jericho, Smart Group. Other investees include Countrywide Austral Media, Tru-Test, Eureka Group.
Crescent Capital is a well established mid-tier private equity firm. It has one tech investment – Groundprobe.
CVC Capital Partners – large scale global private equity firm with just one “tech” investment in Australia – Nine Entertainment Co.
CVC Group – not to be confused with CVC Capital Partners, Local firm CVC Group runs a series of investments funds which “touch” on tech. Current investment include listed firms Cellnet (ASX:CLT) and Mnet (ASX:MMY).
Direct Capital (TMT Ventures) – Direct is one of New Zealand’s premier private equity funds and in the mid 2000’s it had a NZ$123m tech fund TMT Ventures, which is no longer active. Investments included: Argent Networks, Arnold, Communicado, Dilithium Networks, Eftpos, EMS, Enprise Solutions, Esphion, Geosmart, GFG Group, Image Centre, Integration Management, MediaLab, MediaSmart, Moore, Open Holdings, PC Direct, PhiTek, Redfern Integrated Optics, Software of Excellence, Travel.com.au, Momentum Energy.
Dominet / Future Capital Development Fund – very active tech-focussed Micro VC (ie, making smaller investments) set up by Domenic Carosa after the high profile collapse of Destra. Dominet is an investment group, and FCDF is a pooled development fund it operates. See their websites for a full list of investments which include: Drive My Car, BlueChilli, SMS Central, Wholesale Investor.
Endeavour Capital – tech investor from the early 2000’s that has one of the NZ government Venture Investment Funds (NZVIF) licences. Portfolio companies include: 11Ants Analytics, Derceto, Codtor Globals, ectus, Flexidrill, GeoSmart, GFG Group, Graftoss, HTS-110, Nexus6, Novatein, Obodies, Photonic Innovations, Swiftpoint, SMX.
Equity Partners –Had a series of tech investments in the early 2000’s but now a “mid-cap mainstream” private equity firm. Investments included: Legion Interactive, Boss Business Software, Tower Software, Energetics, Yambay, Protocom, Portland Orthopaedics, Agrilink.
Foundation Capital – one of the original IIF funds but now fully invested. Foundation “re-birthed” as boutique VC Stoneridge Ventures. Investments include: DSpace, nearmap, Taggle,
Four Hats Capital – Spun out of investment firm Nanyang in the mid 2000’s taking the IIF licence with them. One of its well respected principals, Mike Hirshorn passed away in 2011. Vale Mike. Covered ICT and bio, with ICT investees including: Mooter Media, Permission Corp, Vigil Systems.
GBS Ventures. GBS focusses on lifes ciences, but occaisionally a company is both a life sciences and an ICT company, and from this perspective GBS is very important to the tech sector. They are one of Australia’s pre-eminent VC’s with a long track record. Investments with an ICT flavour include: AIMedics, Cogstate, Dynamic Hearing, Neuromonics, NeuroVista, Pacific Knowledge Systems.
Innovation Capital – ICT & Bio – long establised tech investor. Its 2000 $36.5m fund is fully invested and its 2007 $50.8m fund is not far behind. In May 2013 it was awarded a $20m government grant towards a $40m fund so it should be back investing with a vengance very shortly. Investments include: Active Sky, Audinate, bCode, CallJourney, Cap-XX, Elanti Systems, Enterix, Medi-Stream, Micromet, QRX Pharma, Neuromonics, Opto Global, Windlab, Wine Preserva, VPI Systems.
Ironbridge – one of Australia’s pre-eminent private equity firms it occaisionally gets involved in the tech sector. Investments include ISG Management, MediaWorks, and a majority stake in ASX-listed Bravura,
Jolimont – A tech-focussed secondary fund (ie. they buyout other investors/VCs equity to provide them with a liquidity event). Investments: Ambri, Daintree Networks, Distra, Fitness2Alive, HumanWare, Park Assist, Plantic, Nufern, Redfern Broadband, Redfern Integrated Optics, Redfern Optical Components, Redfern Polymer Optics, Ceramic Fuel Cells, 5th Finger, Cogstate, nufern.
Macquarie Bank – In the early days Macquarie had a Technology Capital group investing in tech companies – such as Looksmart – and then moved to a model of managed investments funds, such as the Macquarie Communications Group, acquired by the Canada Pension Plan Investment Board (CPPIB) and the Macquarie Media Group, now the Southern Cross Media Group. Post GFC Macquarie has substantially “moved on” from tech investments but there are some notable individuals in Macquarie that still undertake significant investments including: Nintex (recently sold to TA Associates for $220m), Nuix, OzForex and in the past, RP Data, oOh!Media, and Seek. You wont find this on the Macquarie website though…
MB Holdings. An investment group consisting of former ICT industry verterans, notably Richard Mathews who was involved in the sale of Mincom to San Francisco Partners in 2007 for A$315m and eServeGlobal’s telco business to Oracle in 2010 for US$94m. Is an “open investment vehicle” and involved in eServeGlobal (ASX:ESV), Mondelio Software and RungePincockMinarco.(ASX:RUL).
M.H.Carnegie & Co – is a tech investor that burst onto the scene after Mark Carnegie and John Wylie sold their investment bank to Lazards in 2007. In 2011, Mark Carnegie secured a $20m IIF fund creating a $40m fund, and then secured a second IIF fund grant of $40m in 2013 to underpin an $80m fund. That’s $120m in total, and on top of this Carnegie maintains a “private opportunities fund” with significant additional capital.
Expect a significant flow of investments in the next 2-3 years!
Investments to date: Assetic, Minomic, One Big Switch, Sydney Angels Side Car Fund, Winged Media.
MGroup – A group of tech investors loosly based around former Datacraft connections who work together on investments. An open-ended fund, Investments include: Cohda Wireless, DDNi, Haliplex, InLink, Lockbox, McMillan Shakespeare, QSR International, SciVentures Fund.
Momentum VC – not to be confused with Peter Ivany’s Sydney-based Momentum Private Equity, Momentum Funds Management had one of the first IIF licences in 1999 and a 10 year $30m fund which has since concluded. Investments include Retriever Communications.
Neo Technology Ventures – ICT– 1 established fund
Clearsonics, Evolution Impulse Logic, Genbook, OKL, Redfern Polymer Optics, SignIQ Retail Systems, Signav
Netus – ICT & new media – new (2007) $40m fund with backing from News Corporation.
Allure Media, Buyster, Downstream Marketing, Reachlocal Australia, Tantalus, Swtichwise, Travel.com.au (exited)
One Ventures – ICT & new media – new (2010) $40m IIF fund investing in ICT and biotech
mi-pay, Datacastle, Adgent 007
Paragon – South Australian group with origins in ICT. Now “mainstream mid cap” focus.
Quadrant – late stage mainstream private equity group notable for its recent successful investment in Tower Software
SciVentures – ICT & Bio – 1 establsihed pre-seed fund for research-spinouts.
Aqua Diagnostic, Cohda Wireless, Lighthouse Technologies, Medsaic
Southern Cross Ventures – ICT – a large, new (2006) $200m fund actively investing in the sector
Mantara, Mesaplexx, Mocana, RIO, RMSS, Xumii/UIActive, Xerocoat
Starfish (formerly Jafco) – ICT & Bio – 2 established funds & a $185m new fund closed in 2008. Highly credible and very active VC.
5th Finger, Audinate, Aruspex, Austhink, CAP-XX (exited), Colloidal Dynamics (exited), Distra, Engana (merged into Optium & then Finisar),G2 Microsystems, Holly Connects, iCix, Monitoring Division, Ofidium, QS Semicondusctor, Quickcom, Space Time Research, Zoom Systems
Starfish PreSeed Fund – ICT & Bio – 1 established fund; smaller investments
Xelor Software (Cortec ex QPSX), NeuProtect, TeeleOstin, TheraPPy, audinate, austhink, Ceram Polymerik, iCix, Impedimed, Migfast, Murigen, Neyprotect, Protagonist, QS Semiconductor, Quickcomm, Senviro, Space Time research, TeelOstin
Stoneridge Ventures – Foundation Capital “re-birthed”. WA based fund. Portfolio companies incl. Foundation investees:
Intellection, Onerail, Secura-Shield, Taggle, Xelor, Ceram Polymerik, Fractal (exited)
Trans Tasman Commercialisation Fund – ICT & BIO – a $20m established fund & a new 2007 $40m fund. Focussed in university research commercialisation (Adelaide, Flinders, South Australia, Auckland & Monash). Life sciences, clean tech and ICT including:
SNAP Network Surveillance, Ofidium
Technology Venture Partners (TVP) – ICT – 2 established funds. $190m under management. Highly credible long standing investor but their funds are pretty much invested.
MIG33, Cap-xx, Clear2Pay, Optium(Engana), Genetraks, ManageSoft, Peregrine Semiconductors, Security Domain (exited), Sensory Networks, Threat Metrics, Viator Inc, Xelor Software (Cortec Systems), Avega, Emotive, Eurekster, Intellection, Zoom Systems
UniSeed – ICT & BIO – a $20m established fund & a new 2007 $40m fund. Focussed in university research commercialisation; mainly life sciences & clean tech but some ICT including:
Audio Nomad, Fultec (exited), Vintela (formerly Wedgetail, & exited)