Research into Venture Capital
The Venture Capital (VC) market is an emerging investment sector in Australia. Venture capital is defined as capital invested in high risk enterprises that promise high returns. While various government programs have been in effect since the early 1980's to stimulate the venture capital sector in Australia, very little is known about the dynamics of the VC market due to a lack of relevant statistics. Even though various organisations gather and publish VC data, the ABS is the first statistical agency to conduct a comprehensive survey. The ABS survey collects most of the activities involved in the VC process including information on investors, funds, fund managers and investees.
The ABS began its first VC survey for the 1999-2000 financial year at the request of the Department of Industry, Tourism and Resources (DITR) and the National Office for the Information Economy (NOIE). Since then the ABS has conducted 3 annual surveys. In the most recent survey conducted for the financial year ending June 2002, VC funds attracted $6.9 billion in capital commitments (capital promised) and invested $4.4 billion. The availability of comprehensive VC survey data generated considerable interest from a wide range of users including our major clients (DITR, NOIE) and others (Reserve Bank of Australia, Treasury, ACT government, academics etc.) for policy purposes and research.
Recently, Analytical Services Branch (ASB) conducted two exploratory studies using VC survey data to widen the knowledge of VC needs and to add value to survey statistics.
Identify determinants of VC fundraising and investment performance
Develop a performance indicator
- The objective of this exploratory project was to determine statistically significant relationships in VC investor behaviour (factors influencing commitments), funds behaviour (factors influencing drawdowns) and investee behaviour (deals performance). Empirical models were developed to represent the expected relationships. These were then tested using the third-wave of VC survey data. The results showed that there were factors that are associated with VC fundraising and investment performance. A paper summarising the findings of this research was presented at the 16th Australasian Finance and Banking Conference in Sydney.
Further research that could be undertaken using the VC data includes linking VC data with other business survey data, longitudinal analysis, VC exit pattern and alternative methods for analysing investment performance.
For more information, please contact Tala Talgaswatta on 02 6252 5376 or Luke Samy on 02 6252 5933.
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- A range of methodologies were investigated to develop a performance indicator for VC investments. The development of a performance indicator provides a statistical measure of performance of VC enterprises and thus assists investors with their decision making. Three methodologies were tested: the application of portfolio allocation method; discounting method; and weighted standard deviation method. The results showed that different industries and activities in VC have different levels of returns and risks. The portfolio allocation method provided a better measure of performance than other methods.