Plenty of VC funding ready to go

Australia's venture capital and private equity market appears to be having trouble handling the strong inflow of money into its funds, with more than one third of total funds yet to be invested.

The market grew at a healthy rate of 22 per cent in 2006/07, with commitments increasing from $12.5 billion to $15.2 billion, according to an Australian Bureau of Statistics' survey published yesterday.

At the end of June last year there was $5.7 billion of committed funds yet to be called on. That number is up 14 per cent from the $5 billion of undrawn funds reported in June 2006.

The biggest contributors to venture capital and private equity are superannuation funds, which have $8.1 billion invested.

The $15.2 billion was distributed among 280 investment vehicles operated by 186 VC and PE managers. They made $2.8 billion of new and follow-on investments in 1076 businesses.

Those managers reported that they reviewed 8769 potential new investments during 2006-07.

The net value of exits, through trade sales, initial public offerings and buybacks, was $806 million.

The majority of businesses that attract VC and PE investment are young - between two and four years old.

But in terms of the value of investment, there is a big skew to large LBO and MBO deals. One third of the total value of investment is in LBO and MBO deals.