1 The statistics in this release have been compiled from data collected in the Venture Capital and Later Stage Private Equity (VC&LSPE) survey for the period 2007-08 to 2016-17.
2 The 2016-17 VC&LSPE survey was fully funded by the Department of Industry, Innovation and Science. The survey was first conducted for the 1999-2000 reference period, with results released as a feature article in Managed Funds, Australia (cat. no. 5655.0) - December quarter 2000 issue.
3 The VC&LSPE survey aims to have full coverage of all resident VC&LSPE funds (vehicles) in enterprises that meet the following definitions of Venture Capital and Later Stage Private Equity.
4 Venture Capital (VC) is defined as high risk private equity capital for typically new, innovative or fast growing unlisted companies in the pre-seed, seed, start-up or early expansion stage. A venture capital investment is usually a short to medium-term investment with a divestment strategy with the intended return on investment mainly in the form of capital gains (rather than long-term investment involving regular income streams).
5 Later Stage Private Equity (LSPE) is defined as investment in companies in the late stage of expansion, turnaround and buy-out or sale stage of investment. These companies are still being established, the risks are high and investors have a divestment strategy with the intended return on investment mainly in the form of capital gains (rather than long-term investment involving regular income streams).
6 VC&LSPE fund managers set up a fund (vehicle) usually as a trust or company. As VC&LSPE funds (vehicles) invest in a business, they become part owners and may require a seat on the company’s board of directors. They tend to take a minority share in the company and usually do not take day to day control. The investment managers provide support and advice on a range of management and technical issues to assist the company to develop its full potential.
7 Fund of funds which invest mainly in other VC&LSPE funds (vehicles) are also included within the scope of this survey. This type of fund pools investments from a diverse range of investors and mainly places its investments with other VC&LSPE funds (vehicles) that then invest in investee companies. Direct investments may occur, but are typically undertaken as a co-investment with another fund manager who manages the investment.
SCOPE AND COVERAGE
8 The population of investment managers included in the survey was constructed from lists of participants in government programs (including Pooled Development Fund, Innovation Investment Fund, Venture Capital Limited Partnerships, Early Stage Venture Capital Limited Partnership) membership of the Australian Private Equity and Venture Capital Association Limited (AVCAL), the Australian Venture Capital Guide, business directories and venture capital journals.
9 The statistical unit for the VC&LSPE survey is the resident VC&LSPE fund (vehicle), however, the reporting unit is the resident fund manager.
10 Funds (vehicles) which were not in scope of the survey included organisations with a principal activity of providing non-financial support to seed industries. For instance, incubators (typically providing office space and support) set up by either a State Government or by way of a Commonwealth grant, facilitate seed enterprises in their efforts to get the business into a position of growth. The incubator may offer grants, seed funding, reduced office rental, mentors, marketing contacts and access to office equipment. Only those incubators with significant equity investment in seed enterprises were included in this survey.
11 Funds (vehicles) not based in Australia, organisations with a principal activity of providing non-financial support to seed investments, family trusts, and private individuals investing in private equity, known as "business angels" are out of scope of this survey.
CHARACTERISTICS OF VC&LSPE ACTIVITIES
12 The following are typical characteristics of VC&LSPE activities:
STAGES OF INVESTMENT
- The VC&LSPE industry receives a large number of approaches from individuals and groups of individuals who have what they believe to be good business propositions.
- A small number of these may receive more thorough examination, and decisions are made as to which proposals will receive more funding.
The following describes various stages at which a VC&LSPE fund (vehicle)
may make investments:
TYPES OF CAPITAL
- Venture Capital (VC) refers to the pre-seed, seed, start-up and early expansion stage of investment.
- Later Stage Private Equity (LSPE) refers to the late expansion, turnaround and buy-out or sale stage of investment.
The following definitions of the type of capital sourced from investors are used in this survey:
- Commitments by investors - capital pledged by investors, representing the maximum amount that the fund (vehicle) may drawdown from investors.
- Drawdowns from investors - capital committed by investors that has actually transferred to the fund (vehicle) in aggregate for the life of the fund. Also known as cumulative called or paid-up capital. Calls made, but not yet received, are excluded. For companies, drawdowns from investors represents paid-up cumulative called capital as at the end of the year.
- Unused commitment - the unutilised portion pledged by investors, which is yet to be received.
The VC&LSPE industry uses a variety of valuation methods for the equity they hold in the investee companies. The valuation methods may vary between organisations and are defined below:
- Assets valued by directors' valuation: assets may be valued by the directors taking care to undertake valuations with integrity and based on a common sense approach. This will need to be logically cohesive and subject to a rigorous review procedure under the direction of senior management and possibly non-executive directors.
- Assets valued by independent valuation: the fund (vehicle) may choose to engage a registered independent valuer who will then value the asset based on the current market movements and environment.
- Assets valued at cost/book value: the cost of the asset at time of purchase by the fund (vehicle) is the preferred method, at least for the first 12 months.
From 2012-13, the AVCAL method was no longer an applicable valuation method type. AVCAL had adopted the International Private Equity and Venture Capital (IPEV) Valuation Guidelines, replacing the former Venture Economics method. If an organisation followed the AVCAL/IPEV guidelines, their chosen valuation method would be based on who carried out the valuation of investments.
Industry groupings are based on the Australian and New Zealand Standard Industrial Classification, 2006 (ANZSIC06). The industry groupings consist of these ANZSIC06 division categories:
- Agriculture, forestry and fishing includes Division A 'Agriculture, Forestry and Fishing'
- Mining includes Division B 'Mining'
- Manufacturing includes Division C 'Manufacturing'
- Construction and utilities includes Division D 'Electricity, Gas, Water and Waste Services' and Division E 'Construction'
- Trade and accommodation includes Division F 'Wholesale Trade', Division G 'Retail Trade', and Division H 'Accommodation and Food Services'
- Transport, postal and warehousing includes Division I 'Transport, Postal and Warehousing'
- Information media and telecommunications includes Division J 'Information Media and Telecommunications'
- Finance, administrative and support services includes Division K 'Finance and Insurance Services' and Division N 'Administrative and Support Services'
- Professional, scientific and technical services includes Division M 'Professional, Scientific and Technical Services'
- Health care and social assistance includes Division Q 'Health Care and Social Assistance'
- Other industries includes Division L 'Rental, Hiring and Real Estate Services', Division O 'Public Administration and Safety', Division P 'Education and Training', Division R 'Arts and Recreational Services', and Division S 'Other Services'
VC&LSPE data prior to 2012-13 are based on the Australian and New Zealand Standard Industrial Classification, 1993 (ANZSIC93)
For further detail on ANZSIC06 classifications see Australian and New Zealand Standard Industrial Classification (ANZSIC)
(cat. no. 1292.0) - issue, 2006 (Revision 2.0).
The activities reported have been classified using Standard & Poor's Global Industry Classification Standard. This classification is commonly used internationally. Further information can be found at http://www.spindices.com/resource-center/index-policies/
Care should be exercised when viewing investee company data. The same investee company may receive funding from several different VC&LSPE vehicles. The number of investee companies represents the number of investments that VC&LSPE vehicles have made, and is not the same as the total number of individual companies that have received funding.
Industry and activity of VC&LSPE investee companies were self classified by VC&LSPE fund managers at the time of reporting. Some organisations may have experienced difficulty in classifying their investee companies. Any changes reported to an investee companies’ industry or activity classifications compared with the previous year were investigated as part of the quality assurance process.
EFFECTS OF ROUNDING
Any discrepancies between totals and sums of components in the tables are due to rounding.
The Related Information tab associated with this release contains links to a range of other ABS publications which may be of interest.
The ABS may be able to provide additional data for this survey on request.