The independent investment company running the Victorian government’s $2 billion venture capital fund has defended its existence and said it is “working to fundamentally reshape the innovation landscape” amid calls for it to be scrapped.
Breakthrough Victoria, a company established to run the $2 billion fund stumped up by the Victorian government at the height of the COVID pandemic in 2020, has responded to criticisms of its operations, transparency, and very existence amid Victoria’s rising debt.
The fund was established in the November 2020 budget to provide cash to local businesses for research and development, adoption and commercialisation, with a focus on medical research, health and life sciences, advanced manufacturing, and digital technology.
At the time, treasurer Tim Pallas said it was an “Australian-first” initiative that “typifies the government’s optimism”, and that the fund would help to “supercharge growth in new innovations, new companies, and new jobs”.
An ABC 7.30 report earlier this month aired concerns about the state government operating a venture capital fund while it is facing escalating debts, with some of the tech figures interviewed calling for Breakthrough Victoria to be scrapped entirely.
Prominent tech investor and Catapult executive chair Adir Shiffman has been leading the charge against the fund, and has said it is “poorly conceived, suspiciously political, huge, opaque, using the wrong KPIs, an overly broad and unclear mandate, poor governance and reporting that is slower than expected and provides little clarity”.
“There is also no need for $2 billion of government money competing against an ocean of private venture capital in Australia,” Shiffman posted on LinkedIn.
“Above all, this is not the government’s money to burn.
“The right decision is to return the money – or at least a large portion of it – back to Victorian taxpayers.”
Breakthrough Victoria defends itself
Breakthrough Victoria responded to these critiques in a media release last week, in an effort to clarify its purpose and justify its existence.
“Breakthrough Victoria is an investment company established to drive innovation and attract capital to Victoria,” the statement said.
“We work alongside domestic and international partners to commercialise new technologies and help turn innovative ideas into new products and new businesses.”
Breakthrough Victoria has now committed more than $300 million in capital in its three years of operation, and has made 22 direct investments in companies, one investment in a fund, dished out one grant, and made six university innovation partnerships.
It is operating as “more than just a VC”, the statement said, with a focus on the social impact of its investments.
“Through our direct investments and industry partnerships we are working to fundamentally reshape the innovation landscape,” it said.
“Our direct equity investments support early-stage companies that only have the long-term potential to generate sustainable returns over time, but also the potential to improve the lives of all Victorians.
“In short, Breakthrough Victoria is more than just a venture capital firm.”
Transparency concerns
The fund is aiming to assist local companies when they are looking to grow and expand overseas, Breakthrough Victoria CEO Grant Dooley said.
“The challenge in raising funding in the early stages of commercialisation, and as businesses seek to grow outside of Victoria into overseas markets, are widely understood,” Dooley said.
“At Breakthrough Victoria, we seek to bridge both those funding ‘valleys of death’.
“As a three-year-old company, our focus is on refining processes, building relationships and increasing awareness about the role Breakthrough Victoria can play in the market.
“But we are already having a significant impact.”
In response to transparency concerns, the fund said that it has more reporting requirements than most other investment firms and rejected a claim in the media reporting that it had spent $22 million in staff expenses last year.
The fund said that its operating expenses for the 28 months from March 2021 to June 2023 were $24 million, which includes all company establishment costs, professional services and salaries.
A large venture capital fund established by the Victorian government was first proposed by former Premier John Brumby, who is now the Breakthrough Victoria chair.