Local venture capital is what fledgling entrepreneurs need.
T HOSE in the technology startup scene world have long complained about how difficult it is to raise capital in Western Australia.
That’s because there is a great chasm between the ideas seeking investment and the private money in the venture capital world.
That is both geographic and structural when it comes to WA.
Most startups are unconnected to the state’s mining industry, where much of the private wealth is held. In the past, those who made money out of mining tended to reinvest their winnings into that sector.
There are good reasons for that: resources are what they know best, and they can access a very sophisticated investment world well catered to by bankers, lawyers, accountants and, of course, people with projects to promote.
Most non-mining venture capital funds are based in the eastern states. They have little visibility on startups in this state.
There are rare exceptions, but generally investment has been from family and friends – often very rich friends in WA.
Then some found a need to do drastic things, such as having the founders move to Silicon Valley or using the local sector’s expertise to float the business, generally prematurely if you look at their track record.
In some ways, however, WA has had a successful startup culture despite these limitations.
Nevertheless, there are signs that the scene is evolving rapidly here. Andrew Forrest’s private investment company, Tattarang, last year launched a $250 million venture capital fund called Tenmile to leverage the millions of dollars of research and development funding by governments that supports innovation but fails at the commercialisation phase: the so-called ‘valley of death’ for many startups.
That followed a greater amount of state government funding for startups, which had been welcomed by many in the sector.
The next state investment in the sector is to help new venture capital funds establish here.
The government recently created the $900,000 Western Australian Venture Support grants program, which will help with some of the operation costs of running a fund in WA.
This has merit. Years ago, Yuuwa Capital launched a $40 million early-stage investment fund on the back of co-investment from the federal government.
After 10 years, the fund was wound up – as it was obliged to do under its terms as a closed-end fund – but it did make a number of successful local investments along the way.
The big problem was it mainly worked in isolation.
I should also mention BetterLabs Ventures, a seed capital fund that has been backed by RAC.
Elsewhere, I hear a flurry of new venture capital funds is headed to WA.
If my sources prove correct, they plan to raise and subsequently invest up to $150 million in new capital aimed at startups.
Some of these funds, I understand, will tap into the WAVES funding mentioned above.
Set to launch is Derek and Kylie Gerrard’s Purpose Ventures, which cites Marcus Tan, Nicole Lockwood and Brodie McCulloch as venture partners in its fund to invest in startups seeking to make the world a better place.
Charlie Caruso’s Quokka Capital is another fund readying for launch, while an announcement is imminent from Glenn Butcher’s FundWA, which I mentioned late last year and plans to raise $50 million from high net worths, family offices and sophisticated investors over three years.
All of these funds have management with amazing pedigree.
Another interesting development is Vici Ventures, which is associated with the Perth Angels and was unwrapped to the market in late 2022.
Co-founded by Perth Angels chair Wilson Casado, Vici is not a fund.
It describes itself as a venture partner in early-stage deals that plans to nurture innovative and high-growth ventures with essential capabilities and build a community to raise the founders.
StartupWA chair Jason Balchand said this new cohort of fund managers aiming at various stages of the startup process was needed, even though WA already had a proportionally strong deal flow.
“[That’s] what has been lacking in the sector for a long time,” he said.
Let’s hope it works.
