We’re used to lamenting the scarcity of venture capital in WA, but we sometimes forget Perth has a not-insignificant VC track record. Stone Ridge Ventures operated a number of funds with decent exits like Scanalyse, and Yuuwa Capital’s $40m fund is now a decade in and focussed on managing existing investments (like iCetana). There haven’t been any funds of this size launched in a while, though other boutique funds are coming onto the scene with big ambitions, like 808 Ventures (not exclusively focussed on WA but based in Perth), Lateral Capital Ventures (NCX, Spectur) and RAC’s recently launched corporate venture fund Better Labs (see footnote).
By virtue of their smaller size, these funds tend to target the seed stage, and so there remains a funding gap at the later stages which continues to be filled largely by the ASX. The stock market remains a disproportionately high (compared to other states) source of funds for WA’s startups, with companies like Fastbrick Robotics, Brainchip and AusCann raising over $100m over the last couple of years between them.
Angel investment plays a vital role in supporting earlier stage businesses, though total funds deployed are small in terms of total venture dollars. As of earlier this year WA now has two angel groups, with Southwest Angels joining Perth Angels, or three if you include Innovation Bay. A positive sign is that Perth Angels invested more in the past year than Melbourne Angels or Sydney Angels, despite being a younger group with a smaller membership operating in a less sophisticated environment. The reality is, there have still not been any exits by angel groups in WA, and the larger angel cheques tend to be written outside of the formal angel groups and are often less visible.
While a lot of WA wealth remains fixated on resources and property, a number of family offices play an active role in funding early stage ventures, like Larsen Ventures (HealthEngine, Humm), the Vukelic Group and the JJ Leach Group. The number of seed accelerator programs has multiplied over recent years, in particular the Plus Eight program supporting a number of ventures with funding, education and networks. Other programs like Founder Institute and Vocus Upstart are not currently active.
In recent months startups have taken to crowd-sourced funding big-time, with multiple startups being funded. West Winds Gin was first off the mark with close to a million dollars raised, followed by Credi ($250k), and Rhinohide, Urbotanica and Tiller Rides all running concurrent campaigns at the moment (see footnote).
The biggest funder of earlier stage ventures likely remains the R&D tax incentive. Federal funding is also available through Accelerating Commercialisation grants and EMDG. The Medical Research Commercialisation Fund (managed by Brandon Capital) has supported a number of WA life science companies, with OncoRes Medical a notable example. Over the past four years, the Accelerating Commercialisation program has provided $12m in funding to 23 businesses in WA with pre-revenue projects. State funding of the startup ecosystem remains disproportionately small compared to other states, with WA only receiving around 1% of the national total state funding.
This post was originally published in StartupWA's ecosystem report in November 2019 - accessible here. As a reflection of how fast the ecosystem is evolving, the following updates are already required:
- Better Labs Ventures has now dramatically increased its fund size from $3m to $23m under management, making it Perth's largest fund, and allowing it to extend funding to Series A and Series B rounds.
- Tiller Rides ($1m) and Rhinohide ($0.6m) successfully completed their crowdfunding campaigns.