New venture capital fund launches for tech companies with revenue under $5 million

Small tech companies struggling to access funding to expand their business may have been thrown a lifeline thanks to the launch of a new venture capital fund that is looking to invest in firms with less than $5 million in revenue.

Sydney-based venture capital fund OneVentures has $40 million to invest in early stage companies in the clean tech, life sciences and new media sectors (including IT, internet and telecommunications businesses).

Managing partner Michelle Deaker says the fund was one of the few to raise money last year; $20 million came from high-net worth individuals, underwritten by broking firm BBY, while $20 million came from the Federal Government’s Innovation Investment Fund program.

Deaker says that raising the money in the downturn of 2009 was a tough slog.

“Gradually the market improved over the course of the year and it sort of got a little bit easier. But I would say in a normal market we would have raised twice as much money.”

“People don’t always want to invest in the market when it’s the right time to invest.”

The fund’s focus will be on early stage ventures that have got through the R&D stage. Deaker describes these firms as being in the early stages of commercialisation – either the company will be close to launching their product or will have some achieved some early revenue.

“We think we can add value to companies at that stage of their growth,” Deaker says.

“We’ll do anything from zero to $5 million, basically. We are looking for tech companies with a competitive advantage but something that is applicable globally.”
She says the company is currently receiving one or two approaches from prospective companies every day and expects that will grow.

“The deal flow isn’t an issue and there are some very good companies out there.”

She is particularly excited about Australia’s life sciences sector and clean tech sector, where companies have been able to develop world-leading technology with relatively little help.

“In the clean tech sector for example, we’ve had 20 years of on-going R&D when the rest of the world is just getting into it.”

For companies considering a pitch to OneVentures or another venture capital firm, Deaker has two pieces of advice: do your research and don’t overestimate your company’s value.

“We find that companies come in with exceedingly unrealistic valuations,” she says, adding that companies need to be prepared to have an open mind about the value that a partner like a venture capital fund actually brings to them.

She also warns companies to understand where a VC is focussing before they pitch.

“When you present to VCs, don’t try to sell them an opportunity that might be out of their sphere,” she says.

Deaker says OneVentures is hoping to leverage the fact it has an entrepreneurial outlook when making investments.

She is the founder of several companies, including E Com Industries, which survived the tech crash of 2000 and was sold in December 2005 for $30 million, while fellow fund manager Paul Kelly has founded and run several life sciences and pharmaceuticals companies.

Deaker says the company is also on the lookout for former entrepreneurs who might be interested in getting involved with the fund’s investee companies, where they require management experience.

“We are always looking for really good people who might have worked in early stage companies before. “