One of the central missions for Frequency Ventures is to assist hardworking Australians get exposure to the venture capital investment portfolios in the United States. In pursuit of this goal, matching the superannuation fund investment thematics with US venture capital fund management experience and fund thesis is crucial.
In a recent Pitchbook report, it was noted that the Future Fund (Australia’s sovereign wealth fund with AUD $205 Billion funds invested as at 31 March 2020) had invested in 3 early stage deals and 29 late stage deals since 2006 .
We know that the Future Fund portfolio construction includes investing as a limited partner (LP) in well known Silicon Valley venture capital firms including Bessemer Venture Partners, Lightspeed Venture Partners and New Enterprise Associates. I was told this by several partners of each firm many years ago.
With the Future Fund leading the way forward, industry superfunds in Australia are increasingly looking at venture capital as part of their portfolio construction. Given the multi-billion dollar super fund sizes and the need to write larger cheques, investing in smaller seed and A round Silicon Valley venture capital funds (typically $100M to $250M in size) often is prohibitive because the fund composition doesn’t work out.
In several meetings with Chief Investment Officers of Australian Industry Superfunds in recent years (who have invested smaller amounts into Aussie based VCs), they say their minimum investment size is $75M to $100M. This means the US VC fund would need to be $1B in order for the fund to feel that they have around 10% of the total fund size.
Moving forward, It is likely that the Australian Industry Superfunds fund sizes and their risk profile will see them contributing to later stage Series C, D and E rounds as the Future Fund has done. If the deal participation rates of both the Future Fund in Australia and Sovereign Wealth Funds globally are any indication, then the larger Australian Industry Superfunds will follow suit into later stage deal flow.