Last month, Aussie venture capital firm OneVentures announced it had completed the final close of its fourth fund, raising about $80 million.
That brings the 1V Venture Credit Fund’s pot to $120 million, to be invested into Aussie startups over the next three to four years. But, what will pique its investors’ interest?
Speaking to SmartCompany, OneVentures managing partner Dr Michelle Deaker says the team is looking for startups that are already generating revenues of more than $3 million in recurring revenues, and those that have a solid investor base.
For these companies, the venture credit, or venture debt, funding approach can prove a more attractive option than venture or equity capital funding, she says.
It serves to give startups a cash injection, while also offering them the opportunity to keep hold of more equity in their business.
That’s becoming particularly pertinent in the COVID-19 environment, Deaker explains.
“Some companies might have found that their growth has slowed during COVID, or it’s been harder for them to do business development,” she says.
“It doesn’t mean the business is necessarily not a good business, it’s just finding it a bit harder in this market,” she adds.
“Taking some venture credit gives them a longer runway to get their business going again and go out and raise capital at a later point.
“Maybe that use-case has become more obvious to people now, and we’re seeing a lot more enquiries around that.”
There are also opportunities in certain sectors, post-pandemic, Deaker says.
The fund is always looking out for high-growth technology companies anyway, but in areas such as collaboration tech, telehealth and use of AI in healthcare, she’s anticipating seeing an uptick in engagement that likely wouldn’t have happened if it wasn’t for the crisis.
We can also expect to see new technologies emerging as entrepreneurs in garages all over the country put their minds to new innovations.
COVID-19 has likely changed the nature of work forever, she says. Now, it’s fair to assume there are people working on the productivity software and remote workforce tech that will be the big names in a few years’ time.
The same goes for e-commerce and online training and education tech, she notes.
But seizing these opportunities takes a certain type of person.
Success comes when “good planning meets opportunity”, Deaker explains.
Often, it’s about the right person, with the right skills and the right vision, taking the leap at exactly the right time.
“You’ll often find that the best entrepreneurs have been working in an area in a space for a while, and then suddenly there’s a turn in the market that gives them a tailwind, and they can really capitalise on that opportunity,” she says.
“It’s somebody who’s got a good vision and a plan, and then they’ve finally seen that the time has come, and they’ve been able to move forward with that opportunity.”
If you’re a founder thinking of pitching OneVentures for investment, there are certain criteria that might help you stand out.
“We want to see that the team looks strong, that you have good investors backing you and you understand your business and your business and your business metrics,” Deaker explains.
“What are your key performance metrics for the business? How do you track those and manage those?
“And then, obviously we want to see that you’ve got a big market that you’re addressing, and you understand your market.”
But, as well as all this practicality, Deaker is also looking for passion, and her advice here is simple.
“Make us excited about the business,” she says.
“We want to know that you believe you’ve got a good future.”