Start-ups still waiting for government response on VC review

The federal government has delayed its response to a review into Australia’s venture capital industry, after previously indicating that it would outline its policy on the sector by the end of 2012.

A review of venture capital and entrepreneurship in Australia was undertaken in the first half of 2012 and was expected to have had a government response by the end of last year.

The review included analysis of the existing support for venture capital, such as the Innovation Investment Fund.

The IIF program is a co-investment scheme whereby the government licenses private sector fund managers and provides them with capital for investment.

This must be matched with capital raised by the fund manager from the private sector.

IIF venture capital funds invest in early stage companies commercialising Australian R&D, and enable private sector investors to leverage off public equity capital.

By demonstrating the returns achievable from investing in such companies, the IIF program aims to attract additional private sector investment in early stage venture capital.

The government’s review into venture capital and entrepreneurship was expected to provide an update on the future of the IIF.

The review was forwarded to Greg Combet, Minister for Industry and Innovation, for a response.

Combet was expected to announce the future of the IIF, and highlight a policy position on the venture capital industry more generally, before the end of 2012.

Asked about the delay, a spokesperson for Combet says: “The government will release an Industry and Innovation Policy Statement early this year and will respond to the venture capital review in this statement.”

The Innovation Investment Fund (IIF) process to select fund managers for the fourth tranche of its Round 3 is well advanced and is expected to be finalised in the first half of 2013.

“In this tranche, the Gillard government will provide $100 million, (to be matched on at least a 1:1 basis by capital raised from the private sector through fund managers) generating at least $200 million of new venture capital to be invested in innovative Australian start-ups.”

“This will be the final tranche of funds under the third round of the IIF program. Together, the Gillard government and the private sector will have committed at least $490 million of venture capital to support Australian innovation under this round.”

“To date, over $473 million has been returned from investments made under the IIF program, with more than $320 million distributed to the private investors.”

“IIF Funds operate for 10 years so tranche four of round three will conclude in 2022-23.”