Superfunds are starting to come to the VC Party
Industry super fund Hostplus is looking to invest $1 billion of its $36b fund in venture capital that will help fund the future of the country’s economy.
“If the whole thing dies and the whole billion evaporates, we have only lost one divided by 36, which seems like a lot, but it isn’t with the potential outsize returns from successful investments … So my question is why isn’t everybody else doing it?” Says the fund’s chief investment officer Sam Sicila who believes it is likely to prove a smart investment.
“As a nation we need a mindset that a culture of innovation is critically important. The nature of venture capital is that most of it won’t succeed, but those that do succeed insanely wildly.”
In recent times Hostplus has backed Square Peg Capital, Blackbird Ventures, MH Carnegie & Co, Carthona Capital, Brandon Capital Partners’ Medical Research Commercialisation Fund, UK-based IP Group’s $200 million fund for commercialising Group of Eight universities’ research and CSIRO’s Main Sequence Ventures fund.
While a number of other institutions have begun flirting with the VC sector, such as First State Super, Sunsuper, Hesta, StatewideSuper and AustralianSuper, most have done so in a limited way or not at all.
Blackbird Ventures co-founder Niki Scevak has direct experience of coaxing super funds to invest, and was also able to convince the Future Fund to back his latest $225 million fund. He said it was too early to claim that the floodgates had opened for institutional money, but was optimistic that the initial resistance had broken down.
He said he believed that the scale of Australian funds meant that only a few more getting involved could dramatically change the size of the local industry, however he said the appetite for risk was not easy for some funds to develop.
Niki told the AFR “I certainly believe that venture capital offers the potential for the best returns in the world … Sequoia Capital has significantly outperformed Warren Buffet over 40 years, for example. But the reality is that like the average start-up, the average venture capital fund is a failure,”
“It is essential for the local ecosystem to have strong interest from the big super funds, and the raison d’etre of super funds is to provide for their members’ retirement. So it makes sense to have a sensible exposure into tech companies that will shape the future of our country.”
He said the current government was along the right lines with research and development incentives and that it was time for the government to stop avoiding the topic of innovation-led change, simply because it scared voters about their jobs.
Attached is a link to an interesting presentation of how BSI plays in the Venture Capital space