TABLE 20.3 DISTRIBUTION OF INVESTMENTS BY AUSTRALIAN VC AND PE FUNDS IN
FINANCIAL YEAR 2015 (BY STAGE OF INVESTEE COMPANY)Stage of investee
companyAmount
(AU$)% of sector
total (VC or
PE)% of industry
totalNumber of
companies% of sector
total (VC or
PE)% of
industry
total
Seed 19.34 9% 1% 30 31% 16%
Start-up 130.80 58% 4% 38 39% 21%
Other early stage 19.44 9% 1% 12 12% 7%
Late stage VC 48.08 21% 1% 15 15% 8%
Other VC 6.22 3% 0% 3 3% 2%
Total VC 223.89 100% 6% 98 100% 54%
Expansion/growth capital 1,316.94 40% 38% 50 60% 27%
Rescue/turnaround 61.30 2% 2% 5 6% 3%
Buyout (MBO/MBI/LBO/P2P) 1,417.11 43% 41% 21 25% 12%
Secondary purchase/
replacement capital316.80 10% 9% 5 6% 3%
Other PE 156.54 5% 4% 3 4% 2%
Total PE 3,268.69 100% 94% 84 100% 46%
Total industry 3,492.58 100% 182.00 100%
Notes:
1 In this table, the total number of companies invested in corresponds to the number recorded under the “Total Investment” tables. However, any one
company can be recorded under several stage categories because of migration along the growth curve, or different stages reported by different co-investors.
The sum of companies in all categories can thus exceed the number stated under “Total Investment”. Therefore, it may appear to have incorrect totals in the
number of companies. This will only affect counts of companies; it does not affect the dollar amounts. However, it will make any average more accurate.
2 Stages with fewer than three companies receiving investments have been aggregated into ‘Other’. Percentage figures have been rounded off to the
nearest whole percent, and refer to the percentage of either total PE or VC investment. As the figures only cover investments by Australian VC or PE
funds and international funds investing in Australian companies, investments in companies domiciled overseas will only reflect the amount invested by
the Australian fund, not the total round amount invested by a consortium of international investors.
Source: Australian Private Equity and Venture Capital Association Limited. Used with permission. 2015 Yearbook: Australian Private Equity and Venture Capital Activity Report,
November 2015. AVCAL in partnership with Ernst & Young, p. 14.20: Entrepreneurial Finance and Venture CapitalVCs typically demand compound annual investment returns in excess of 50% on startup investments. But
PE managers will accept returns of 20–30% per year on later-stage deals, because the risk is far lower in
more established companies. VCs extract a higher expected return on early-stage investments, in part, by
requiring entrepreneurs to sell them a higher ownership stake for a given investment amount in these deals.
Usually, there is not a stark choice between early- and later-stage investments. Most VC funds that
invest in a company during its early years remain committed to the company as it develops. VCs typically
participate in many financing rounds as the company they have initially financed matures. On average,
the prices venture capitalists pay to acquire additional shares in companies in which they have made
earlier investments rise in each subsequent round of financing.
20-2e THE ECONOMIC EFFECT OF VENTURE CAPITAL AND
PRIVATE EQUITY INVESTMENT
Before examining the organisational structure of the venture capital industry, we should briefly assess
whether venture capital investments have really been as large and influential as is generally believed.