A new potential investment source is now available for early stage technology businesses with the launch of the Melbourne-based business incubation and venture capital firm Redfire Investments.
Redfire is seeking to raise $70 million for its venture capital fund, and having raised $10 million after just three weeks of fundraising, looks well on track to reach that target.
The firm will look to invest the fund primarily in developing technology businesses, particularly those with an environmental application, in both Australia and Asia.
It has a flexible investment strategy when it comes to size, with start-ups from garage to later-stage firms that have already received some investment eligible for investment.
But while the fund won’t start investing until February next year, the business incubation arm of Redfire has already kicked off with one partner – an Australian firm with a technology to improve energy efficiency of certain kinds of lighting – almost signed up and several others in the due diligence stage.
Redfire’s incubation function will operate independently of its VC fund. And, unusually, the firm will take equity in its incubation “partners” instead of charging a fee for its consultancy services.
Alistair McCreadie, a former investment banker and one of Redfire’s four founders, says taking equity means the firm has a stronger stake in the success of its incubator clients.
“We believe that we’re adding value that they can’t get from elsewhere – we’re prepared to spend whatever time it takes to give business what they need – and equity involvement means we only see a return if their business is growing,” McCreadie says.
The value adding the firm brings to incubation clients stems from the business expertise of the firm’s founders drawn from extensive experience in investment banking, marketing and communications, accounting, angel investing and running their own start-up businesses.
Several of the firm’s founders also have strong Asian links, not the least of which being chairman and major shareholder Lim Ko Hee, a former chairman of UBS (East Asia) with a wide range of interests in Singapore and across the region.
McCreadie says the firm’s Australian-Asian focus will benefit both its VC investors and the firms it invests in or partners with.
“The Asian strategy is very deliberate. We see the growth options there as greater than elsewhere, including the US route that people often take, and we have the experience to take our partners there. At the same time we’re also seeing some good technologies come out of Asia,” he says.
Asia has already provided a valuable source of early support for Redfire’s venture capital fund. Raising funds in the current volatile market conditions is difficult, but like some other firms, wealthy private individuals have proved a more fruitful source of investment than nervous institutions.
So, given the difficult environment, why seek to launch a VC fund? Because the tougher conditions also mean there are bargains to be had, McCreadie says.
“The investment opportunities at the moment are very good; it’s just a matter of getting the cash together. Investors are a little nervous about what’s going on in the markets, but for those able to see through that the prospects for returns are good.”
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