“The time is now”: VCs have the power to shape Australia’s economic future

Australian VCs

Mike Zimmerman (front row, centre) and the Main Sequence Ventures team. Source: supplied.

Australia’s economy is at an inflection point after weathering what has hopefully been the worst of the COVID-19 pandemic. As the private and public sector look for a pathway to reboot the economy, a new breed of startups capitalising on the opportunities presented by the pandemic have emerged.

Having a healthy VC landscape has the potential to have a ripple effect across the entire economy, creating new high-skill jobs, encouraging a self-feeding cycle of startups and lifting the economy as more global export opportunities arise.

Already growing strongly before the onset of the pandemic, Australia’s VC ecosystem has remained remarkably resilient over the last 18 months, with US$944.7 million ($1.3 billion) in funding deals made in the first half of 2020 alone. The past year has also seen the rise of specialist VC firms funding startups in those sectors that found opportunities during the pandemic. With the number of investments and maturity of these specialty funds, all signs are pointing to now as a critical time for VCs, who have a unique opportunity to shape the nation’s economic future by injecting capital into the front line crusaders driving disruption across all industries. 

The future of fintech

Fintech companies have long been the backbone of Australia’s VC ecosystem. While that hasn’t changed — fintech accounts for 45% of all Australian startups — the past few years have seen new verticals sprout from the fintech ecosystem, most notably buy now, pay later providers. 

There’s no shortage in funding for fintechs, but if you’re not convinced, the US$39 billion acquisition of Australia’s Afterpay speaks volumes to how hot the fintech startup scene remains.

Healthcare is in top shape

VC firms are highly attracted to companies that performed well during the pandemic, making healthcare a clear standout.

One such example is HealthMatch. The company raised $18 million last year after online searches for medical treatment skyrocketed. One of its earlier investors, Folklore Ventures, funded HealthMatch before the pandemic, based on the power of founder Manuri Gunawardena’s vision and the potential impact it would have on the healthcare industry — not to mention people’s lives.

Space tech is on the rise 

We’re in the midst of a new space race. Even before COVID, the Australian government injected $150 million in Australia’s space sector, and it has now earmarked space as a key sector for renewing the economy in the wake of the pandemic.

It’s easy to just think about rockets when it comes to space tech, but just like every industry, technology has worked its way into space tech to find new opportunities. Businesses like Australia’s Space Machines Company focus on space mobility, and there are still unrealised possibilities for applications for space tech like mining, logistics and travel, offering investors a whole new world of opportunities.

Deep tech making new discoveries

Deep tech pertains to companies that specialise in the intersection of technology and science, often based on lab discoveries or innovation. Australia’s deep tech sector is chronically undercommercialised and relatively smaller than our international counterparts. That said, Australia punches well above its weight when it comes to its research capabilities.

The Australian government also has its hand in venture funds, given its interest in publicly-funded research. Main Sequence Ventures for example is funded by the CSIRO, the federal government and private investors, targeting early-stage startups with strong ties to publicly-funded R&D. The VC firm already has 20 companies in its portfolio since it was founded in 2016.

Agtech is starting to sprout

Australia already leads the world in agriculture, but there’s still plenty of opportunities yet to be capitalised on. Australia is a leading exporter of agricultural products, but our agricultural technology remains a significant opportunity for VC.

Unlike other sectors, Agtech is less susceptible to late-stage funding bias, and the majority of investment comes from angel investors or family offices, giving them a longer growth runway. Existing investment in Agtech has been focused on farm management software, sensing and IoT technologies, leaving a huge opportunity for funding in areas like supply chain technologies disruption.

Australia not only needs a way to rejuvenate the economy, but it also needs to end its reliance on scarce natural resources and instead look to technology as the next great export. 

One of Australia’s budding Agtech success stories is Beyond Ag, backed by the Melbourne Accelerator Program. The company uses insects to convert food waste into protein for animal feed and organic fertiliser. Every tonne of protein processed by Beyond Ag offsets 100 tonnes of carbon dioxide emissions.

The time is now

Australian investors and VC firms have a once in a lifetime opportunity to invest in the next generation of unicorns coming from Australia. In doing so, we can position our technology and innovation as our next great export, and reshape Australia’s economic future. 

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