Victorian startup-development agency LaunchVic is remaking itself as a pseudo-venture capitalist, offering its services for an equity stake in the startups it works with as it seeks to take the state’s startup sector “to the next level”.
The decision to accept equity expands the options available for startups, to whom LaunchVic has previously only focused on administering government grants.
Startups will also have the option of taking out loans sponsored by LaunchVic, with two new options ensuring they able to access capital even where grant programs are fully subscribed.
The new options will only be available to organisations that “invest in outcomes of their programs” through initiatives such as the Startmate Accelerator, the agency said, with any returns from the investment to be reinvested back into the startup ecosystem.
Echoing the Victorian Government’s launch of a $250m investment fund last year, the new funding measures are a key part of the newly released LaunchVic Strategy 2021-24, which laid out three key goals for the organisation.
These include catalysing early-stage startup investments; supporting programs that grow more scaleups; and driving awareness and advocacy by running awareness campaigns, supporting policy research, and monitoring the startup ecosystem.
LaunchVic is pursuing five key performance indicators including the number of startups supported, investments activated in Victoria, jobs created, awareness, and ROI.
It was established in March 2016 to stimulate a state ecosystem of more than 2,100 startups that was last year valued at $7 billion.
Since then the organisation has, CEO Dr Kate Cornick said in launching the new plan, activated over $129m in private-sector investment, supported hundreds of Victorian startups to scale, and upskilled over 9,800 entrepreneurs.
“While this is extremely positive, we also know that startup ecosystems take time to develop,” she said, “and there is still a way to go before we become a self-sustaining startup ecosystem.”
“The work we are doing now – particularly with regard to early-stage investment – is foundational and will dramatically alter the startup ecosystem in the next 5 to 10 years.”
Expanding startup support
LaunchVic has already funded 130 programs and 19 startup accelerators, with key programs including the $60m Victorian Startup Capital Fund and the newly announced $10m Alice Anderson Fund, which is targeted at women-led early-stage startups.
The agency will also work to upskill founders, educate investors, develop talent, and link startups to government procurement opportunities through programs like the 3-month LaunchVic CivVic Labs accelerator.
By diversifying the range of startups it works with, LaunchVic is aiming to expand the startup ecosystem’s economic base by helping more startups scale to become success stories – and to build on the 40,000 jobs that Victorian startups have already created globally.
“Startups are proven job multipliers, adding thousands of net new jobs to the economy at faster rates than other sectors,” said LaunchVic chair Leigh Jasper.
“It is critical we harness this as we expect the sector to play a major part in Victoria and Australia’s economy.”
Due to both their untapped economic potential and their flexibility to work around constraints imposed by the COVID-19 pandemic, startups have been flagged as critical to recovery, spurring competition for talent as Australia’s economy works to regain its momentum amidst ongoing uncertainty.
Last week, the City of Sydney announced a new 3,800sqm startup incubator called ‘Greenhouse’ that will open next year, nurturing over 100 green-technology startups that are expected to create over 1,500 jobs over the next decade.
Startup employment in Melbourne and Victoria grew by 10.7 per cent annually between 2018 and 2020, a recent DealRoom analysis found – outpacing overall job growth in Victoria by 3 times, with startups less than five years old creating the largest number of jobs during this time.
Australia’s ten best-funded startups had received over $2.67b ($US2.08b) in funding as of May last year, with a reported 5.8 per cent of Australia’s population of 18 to 64-year-olds involved in setting up startups – ranking Australia sixth overall behind the US, Canada, India, Brazil, and the UK.
Australian entrepreneurs currently have access to 196 domestic accelerator/incubator programs, 198 sources of startup capital, 220 research-focused organisations, 165 innovation hubs and 202 education and support programs, according to StartupStatus.co’s gazette of Australia’s startup ecosystem.