A pair of former Hostplus investment specialists have been appointed to run the Victorian government’s $120 million “fund of funds”, which will provide capital to early-stage startups in the state.
The state government has appointed the newly-formed V-Ignite to manage the Victorian Startup Capital Fund following a competitive procurement process run by LaunchVic which began in July last year.
V-Ignite is a partnership between former Hostplus head of private equity and venture capital Neil Stanford and former Hostplus investment specialist Brighid Pappin.
The fund, announced in the 2019-20 budget, will aim to fill a gap in Victorian startup funding for very young companies, Mr Stanford said.
“The catalyst for it was some research that LaunchVic had done over a number of years that identified that venture capital funding in Australia is going up, but in Victoria early-stage funding for startups in Victoria had plateaued. There was at least a $100 million per annum shortfall that just wasn’t going to early-stage startups. That was the genesis of the fund,” Mr Stanford told InnovationAus.
“This fund is all about addressing that market failure and trying to catalyse the ecosystem.”
The Victorian government has pledged $60 million to the fund, with the V-Ignite team now setting out to raise the remaining half from private investors, including superfunds, wealth managers and high net-worth individuals.
Innovation minister Jaala Pulford said the launch of the fund marked a “red-letter day” for the local ecosystem.
“Our ecosystem is growing rapidly and this fund will turbocharge this growth,” Ms Pulford said.
“This fund led by V-Ignite will invest in local VC funds and enable more startups to scale, driving economic growth and creating new jobs for Victorians.”
The “fund of funds” structure will help to drive growth in the wider sector, Mr Standford said.
“By directing the capital through underlying funds you can over time build up the capability in the ecosystem with more managers and more expertise so that hopefully as the startups grow and develop and need more capital there are more avenues to seek that capital,” he said.
The fund’s first close is expected by the end of the current financial year.
The Victorian government’s return from the fund has been capped at 5 per cent, with the participating private investors to receive a preferential return.
“Any additional upside flows directly to the private investors. We think it’s a real win-win,” Mr Stanford said.
“Startups get the capital they need, the government gets the new high-tech company formation, industries and jobs and private investors get higher returns.”
The fund will be independent from the state government and make its own commercial investment decisions.
The Victorian government is also currently on the hunt for a private manager for its $50 million venture growth fund, which will run in tandem with the startup fund to provide capital to later-stage companies.
