Australia’s venture capital industry experienced an increase in both investment value and volume in the 2012 financial year as a result of the growing start-up scene, according to a new survey
The Deal Metrics Survey 2012, released by the Australian Private Equity & Venture Capital Association, is a survey of Australian venture capital and private equity deal activity in FY2012.
In addition to tracking trends across key metrics in VC and PE transactions, the report analyses 30 interviews of VC and PE funds, industry advisors, and equity and debt providers.
“The VC industry experienced an increase in both investment value and volume in FY12 as a result of the growing domestic start-up scene,” the survey said.
“The average size of new investments in FY12 increased slightly on the previous year to $1.2 million, while the average size of subsequent investments declined to $0.8 million.”
“In terms of sector-specific activity, VC investment in the technology and communications industry increased by 54% from FY11.”
According to the survey, fundraising grew due to support from the government’s Innovation Investment Fund, which helps VC funds looking to commercialise research and development.
“There continues to be strong demand from the early stage business community for the government to extend the program or to implement similar schemes,” the survey said.
“The issuance of IIF licences to new fund managers has driven capital raising, and is expected to reinforce the recent growth in the local start-up scene.”
However, survey respondents agreed VC funding has been difficult to obtain in the current economic climate.
“With no clear extension or successor to the successful IIF program announced to date, VC funds have been increasingly turning to alternative sources for funding,” the survey said.
In light of this, AVCAL has called for continued government support of the VC industry.
“The financial and management expertise VC provides to research entities is pivotal to the successful transformation of promising research into a commercial reality,” the survey said.
“Continued government support of the VC industry is therefore vital for the continued development and commercialisation of Australia’s knowledge base.”
Regardless of how the global economic recovery progresses, the survey said FY2013 is likely to be a “good vintage” as the pipeline increasingly offers up attractive investment opportunities.
“From a sector perspective, businesses in health and aged care, education, infrastructure and financial services are likely to be strong areas for growth in FY13,” the survey said.
“Both consumer goods and healthcare and life sciences, which have underperformed in recent years, are expected to see continued growth.”
“In this atmosphere of lingering market caution, most deals done across all sectors will continue to be defensible deals in businesses with strong value propositions and good growth trajectories.”
However, fundraising in the VC sector is expected to remain challenging in the absence of continued support through the IIF program.
“VC funds will have to continue sharpening their fundraising strategies, searching for new opportunities both here and abroad to guarantee succession,” the survey said.