National Commission of Audit recommendations to abolish key startup innovation programs would be step back for Australia and harm Australia's long-run global competitiveness.
That's according to Australian venture capital firm, OneVentures, which is urging the federal government to retain the Innovation investment Fund following the Commission of Audit's recommendation to dissolve it.
The audit, a report commissioned by Treasurer, Joe Hockey, and finance minister, Mathias Cormann, made a series of recommendations which, if adopted by the federal government, would have a major impact on on the ICT sector.
These include the long-term sale of the NBN, the abolition of Innovation Investment Fund and the ditching of Commercialisation Australia and the Export Market Development Grants scheme in a bid to reduce the $9 billion the government spends on research and development each year.
OneVentures chief executive, Michelle Deaker, believes the innovation funding program is a key building block for the future of Australia with a multiplier effect in the economy that is not a cost to the Government.
“Innovation funding programs like the IIF are integral for the venture capital industry in seeding new funds and creating the new industries of the future, and its removal would reduce Australia’s global competitiveness in the long run," she said.
“Government funding programs foster the broader investment community and the IIF model where the Government matches private investor capital, sharing risk and taking a low capped return, encouraging capital from institutions and high net worth individuals to the venture capital asset class”
Alongside the $40 million Innovation Investment Fund, OneVentures, has run a co-investment model where private investors in the Fund can choose investments they prefer and provide additional capital where a funding round is larger than what the fund can support.
The IIF fund set the platform with OneVentures raising an additional $40 million in capital to support technology start-ups with strong market potential through co-investments and syndicated funding largely from offshore.
The amount of funding has therefore effectively doubled into the economy and OneVentures expects the number to be far greater before the end of fund life, according to a company statement.
Emerging companies which OneVentures has supported include medical electronic information system Charmhealth, nanoneedle vaccine technology developer Vaxxas and adaptive e-learning platform Smart Sparrow.
Deaker said in the medium to long term, the number of new jobs in potentially new emerging industries generated through this program for the economy represents a strong case for government support.
"The program also ensures that the country benefits from public financed R and D with six of our nine portfolio companies originating from R and D in Australian universities and research institutions," she said.
She said it was important to note the program was not a grant.
"The investment by the government is on capital account, to be returned in the future as investments are realised by IIF fund managers,” she said.
“Our first Fund has already returned early capital to the Government with that investment providing an internal rate of return of 28 per cent to investors.
OneVentures launched its Innovation and Growth Fund II in March this year, seeking to raise $100 million for institutional investors and high net worth individuals, to invest in start-ups through to emerging high growth companies.
Deaker said the IIF was part of a structure currently in place to aid a venture capital firm’s fundraising process.
"Contrary to the National Commission of Audit report, I believe the Government will be looking to develop this program further if it can," she said.
"The Liberal government originally developed the program recognising that it helps to provide the necessary oxygen to build the new economy, encouraging private sector investment, driving growth companies and fuelling job creation to support Australia’s future."
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