The Victorian government will make equity investments in startups to attract them to the state as part of a newly-launched fund.
The $20 million Equity Investment Attraction Fund, announced earlier this year in the state budget, will make co-investments of between $1 million and $5 million and take non-controlling minority stakes in tech companies.
It will be targeting early-stage companies from Singapore, Israel, the United Kingdom and the United States and aiming to encourage them to either relocate to Victoria or invest “large and critical parts of their operations” in the state.
Through the fund, the state government is aiming to make Victoria the destination place for startups in the country and around the world, Minister for Trade and Investment Tim Pallas said.
“We are supporting startups from high-growth sectors to set up in Victoria as they seek to innovate, expand and create new jobs,” Pallas said.
“The establishment of the fund sends a strong signal to creative and ambitious entrepreneurs who have solid business projects that Victoria is the place to be.”
The fund will be guided by an advisory board, with its members including independent investor Briggitte Smith, GBS Ventures managing director Rachel Yang and investor Kerri Lee Sinclair.
Announcing the establishment of the fund, the newly re-elected Andrews government spruiked the job creating potential of startups.
According to the government, there has been a 10.7 per cent increase in employment year-on-year in startups from 2018 to 2020, and the value of the sector has jumped by 125 per cent or $10.5 billion to be worth $23.6 billion.
“Innovation means jobs now and in the future and that’s why we’re backing startups with great ideas to thrive and grow their business in Victoria,” Minister for Industry and Innovation Ben Carroll said.
The fund, which was labelled a pilot in the state budget, will make up to 10 investments in total.
It will prioritise proposals that create broader contributions to the state economy, such as the creation of new industries, increased employment opportunities, boosting productivity and increasing long-term economic growth.
Proposals must also have a strong lead investor and novel products and services with high commercial potential.
The Equity Investment Attraction Fund was announced earlier this year in the state budget as part of a $65 million package to attract innovative global companies to Victoria and help established businesses expand.
It comes on the back of multiple recently launched funds, including the $2 billion Breakthrough Victoria Fund, the $60 million Victorian Startup Capital Fund and the $10 million Alice Anderson Fund.
Directly making equity investments in startups marks a significant departure in innovation policy for the Andrews government, which has previously focused on backing the infrastructure surrounding the sector through LaunchVic.
This shift began last year when LaunchVic pivoted to begin offering its services for an equity stake in the startups it works with.
The equity investments are only available to organisations that “invest in outcomes of their programs” through initiatives such as the Startmate Accelerator.
While the state government has previously made significant efforts to attract overseas tech companies to the state, this has not before been done through taking equity in these companies in exchange for investment.
The new fund is similar to the $50 million South Australian Venture Capital Fund, which invests in high growth and export potential companies, but is instead focused on attracting companies from outside of Victoria.
A report from last year found that around 5,900 new local jobs were created by local startups between 2018 and 2020, with startups under five years old generating the highest number of new jobs, employing 2,300 people.
