A report from the Australian Bureau of Statistics has shed further light on venture capital and later stage private equity, a section of the lending market defined by the ABS as "high risk capital directed towards businesses with prospects of rapid growth and/or high rates of returns."
The ABS described them as "an investment not only of money, but also of skills and time."
There are two types of venture capital and later stage private equity investment strategies:
- placing funds directly in investee companies; and
- indirect vehicles that pool funds and generally place investments with direct VC&LSPE investment vehicles. This strategy is called a 'fund of funds'.
The value of funds committed to VC&LSPE investment vehicles decreased in 2013-14. As at 30 June 2014, investors had A$18.5 billion committed to investment vehicles, a fall of six per cent from the $19.8 billion committed as at 30 June 2013.
Most of the committed funds were sourced domestically, with 73 per cent of commitments from Australian investors (residents), down from 77 per cent as at 30 June 2013. The value of funds committed by non-residents rose $420 million (nine per cent). Resident pension funds contributed $8.49 million to total committed capital (46 per cent of total funds committed).
Committed funds drawn down from investors totalled $13.13 billion as at 30 June 2014, a decrease of four per cent on the $14.2 billion with 8 million committed funds drawn down as at 30 June 2013.
Committed funds of $4.91 million were yet to be called on, down 12 per cent on the undrawn commitments of $5.58 million as at 30 June 2013. These undrawn commitments can be classified by preferred stage of investment, with $1.13 million undrawn by funds which prefer to invest in companies in the venture capital (VC) stages.
Total valuations of all investments by VC&LSPE investment vehicles ($7.91 million in 652 investee companies) fell five per cent on the $8.35 million reported as at 30 June 2013.