Navigating the Spectrum of Aussie Startup Investors
More than just VCs!
As an entrepreneur embarking on the journey of raising capital for your startup, you might find yourself using broad terms like "VCs" or "investors." However, startup investors span a spectrum, each with distinct motives, characteristics, and expectations. Just as you wouldn't lump all Australians into a single category, understanding this diverse landscape is crucial for making informed decisions that align with your startup's needs and goals.
Imagine the below list of investors mapped on a complex matrix consisting of a diverse array of characteristics, expectations and constraints.. this is the investor spectrum.
The joy of the spectrum is that there is usually an investor to suit most startups and their founding team but the question is whether the founders are open to exploring and accepting their matches. The most glamourous and impactful path may appear to be large VC but that is only but one option.
The Spectrum of Aussie Startup Investors
Traditional Venture Capital (VC)
1.1 Large VC Funds
1.2 Medium VC Funds
1.3 Small VC FundsCorporate Venture Capital (CVC)
2.1 CVC Funds
2.2 CVC Direct InvestmentsGovernment Funds
Semi Government Funds
Direct Fund Investments
Family Offices
5.1 Small to Large Offices5.2 Single Family
5.3 Multi-Family
Angel Syndicates and Angel Groups
Angel Investors
7.1 Family and Friends7.2 Everyday Angels
7.3 Super Angels
Let's break down the key players and their unique characteristics in more detail.
1. Traditional Venture Capital
Whilst everyone knows what a traditional venture capital firm is, most may not know that the venture capital fund size is important for founders to know as it will influence a VC’s expectations of your company and therefore their suitability to invest in you and your company’s vision and mission. To further understand this concept please read this article. While this is out of scope for this article, if enough people request then I’ll write an article on how to find Australian VC fund sizes.
It is also incredibly important to understand the basic concept of power law returns which underpin traditional venture capital.
1.1 Large VC Funds
Due to the size of large VC funds, their expectations are incredibly lofty and this is likely to create an all-or-nothing outcome for your company if you accept their money.
Initial Cheque Size Range: $1m - $10m+
Fund Size Range: $200m+
Initial Investment Stage: Multi-stage (e.g., Seed to Series B)
Subsequent Investment Capacity (Follow-On): Very high
Ownership Expectations: Aiming for high consistent ownership stakes (10% to 25%) and will want to maintain this % over time.
Mandate: Generalist approach with overarching investment theses on trends.
Motivation: Financial.
Expectations:
Focusing on really big visions and high-risk, high-reward opportunities.
Targeting substantial fund returns.
Extremely fast growth is required and large successive capital raises required to achieve this result in founders being incredibly diluted in their ownership of their company.
Examples:
Blackbird Ventures
Square Peg
AirTree
1.2 Medium VC Funds
Initial Cheque Size Range: $500k - $5m
Fund Size Range: $50m - $200m
Initial Investment Stage: Typically Seed and Series A
Subsequent Investment Capacity (Follow-On): High
Ownership Expectations: Aiming for moderate initial ownership stakes (10% to 15%) but unlikely to able to maintain this % over subsequent rounds
Mandate: Generalist approach with investment theses on trends in specific sectors or industries.
Motivation: Financial.
Expectations: Maintaining hands-on involvement.
Examples:
OneVentures - Focuses on healthcare and a ‘generalist’.
Possible Ventures - Focuses on deep tech, life sciences, and software platforms.
ReGen Ventures - Focused on regenerative technology.
OIF Ventures - Generalist investor but large focus on SaaS, FinTech and other digital/software plays with some hardware investments.
EVP - B2B software focused.
1.3 Small VC Funds
Initial Cheque Size Range: $100k - $1m
Fund Size Range: <$50m
Initial Investment Stage: Usually Seed and Series A
Subsequent Investment Capacity (Follow-On): Limited, with flexibility in investment terms and focus.
Ownership Expectations: Aiming for moderate initial ownership stakes (10% to 15%) but unlikely to able to maintain this % over subsequent rounds
Mandate: Both generalist and specialist with a focus on niche markets.
Motivation: Financial and reputation-building.
Examples:
Stoic VC - A technical emerging science and engineering investor.
Melt Ventures - An advanced manufacturing focused fund.
Boson Ventures - A health, med and bio focused fund.
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2. Corporate Venture Capital (CVC)
2.1 CVC Funds
A formal investment fund setup by large companies to invest in startups.
Characteristics: Cheque size, fund size, and initial investment stage vary widely.
Ownership Expectations: Aiming for very high ownership stakes (10%+) and will want to maintain this % over time
Mandate: Ties back to the parent company's core business, with varying motivations such as strategic, financial, or industry advancement.
Subsequent Investment Capacity (Follow-On): High.
Sub-Types:
Single Origin – A single company’s investment fund.
Examples:
Superseed Ventures - Reece Plumbing’s venture capital arm.
BHP Ventures - Mega mining company BHP’s VC arm.
Seek Investments - The venture capital arm of Australian corporate tech company Seek.com.au
NAB Ventures - The venture capital arm of National Australia Bank (NAB)
Industry – A group of companies from an industry’s investment fund.
Examples:
Uniseed - Is funded by a large number of Australian universities with the purpose to fund R&D and researchers from the universities that fund it.
Significant Capital Ventures (SCV) - Investing in applied technology from the research and innovations emanating from these labs and the university and regional eco-systems. SCV is a joint venture between the Australian National University (ANU) and the privately owned family office of the Hindmarsh family. They have capital investment and strategic relationships with partners including ANU, UTS, Deakin, University of Wollongong.
Hybrid – A venture fund that used to be a single company’s fund but has separated from it’s parent and now takes on other investor’s money.
Example:
Telstra Ventures - Separated from its parent corporation Telstra in 2018 and therefore operates independently but is still partly funded by Telstra as it invests in areas that are strategically relevant to Telstra.
2.2 CVC Direct Investments
This is when a large company directly invests in startups in the absence of a formal investment fund (also known as a corporate venture capital fund)
Initial Cheque Size Range: Varies widely
Fund Size Range: Opportunistic; no specific fund set up.
Ownership Expectations: Aiming for high ownership stakes (10%+) and will want to maintain this % over time
Expectations: Strategic ownership or partnerships with startups and access to resources and networks.
Mandate: Aligns with the parent company's core business, often driven by strategic acquisition goals.
3. Government Funds
A fund that has been setup by a state or federal government.
Initial Cheque Size Range: Varies widely
Fund Size Range: Usually quite large
Mandate: Linked to government priorities and policy objectives, such as economic development and job creation.
Examples:
Alice Anderson Fund - Is a Victorian government $10 million sidecar fund supporting Victorian based women-led startups.
Breakthrough Victoria - The Victorian governments $2b investing in advanced manufacturing, agri-food, CleanTech, health and life sciences and some software with the mission to make Victoria state a global innovation leader.
South Australia Venture Capital Fund - A $50 million South Australian generalist fund to support South Australian innovation.
4. Semi-Government Funds
This is a fund that is linked back to a government agenda but includes private investor’s capital as well.
Initial Cheque Size Range: Varies widely
Fund Size Range: Usually large
Mandate: Linked to government agendas focusing on jobs and growth.
Examples:
Main Sequence Ventures - Spun out of CSIRO
Virescent Ventures - Spun out of the federal government’s $10b Clean Energy Finance Corporation
Tin Alley Ventures - Jointly seeded by the Victorian government’s Breakthrough Victoria and The University of Melbourne
5. Direct Fund Investments
This is usually a diversified fund that invests across different asset classes (property, public stocks etc) and has decided to direct startup investments as part of the strategy instead of or in conjunction with investing in venture capital funds.
Initial Cheque Size Range: Varies widely
Fund Size Range: Usually large
Initial Investment Stage: Typically later stages (e.g., Series B+)
Motivation: Financial and diversification.
Ownership Expectations: Aiming for high ownership stakes (10%+) and will want to maintain this % over time
Expectations: Generating attractive risk-adjusted returns and co-investing with other institutional investors.
Examples:
Australian Unity Future of Healthcare Fund
Hostplus
HESTA
Australian Super
6. Family Offices
A family office is one or a couple of very wealthy family’s investment apparatus.
Sub Types:
Small to Large Offices
Single Family
Multi-Family
Initial Cheque Size: $100k to very large
Initial Investment Stage: Varies widely
Subsequent Investment Capacity (Follow-On): High
Mandate: Varies with ties back to how the family’s wealth was generated.
Examples:
Tenmile - Andrew Forrest $250m HealthTech focused single family office fund run by a team.
Tripple - Impact single family office run by family members with a team.
Macdoch Ventures - A generalist fund which is a part of the Macdoch single family office run by professionals.
Skip Capital - Kim Jackson and Scott Farquhar’s (Atlassian Co-founder) single family office run by professionals.
Grok Ventures - Mike Cannon-Brookes’ (Atlassian Co-founder) single family office that only invests in climate-related plays that support decarbonisation of the planet and achieving net zero and is run by professionals.
BridgeLane Capital - A single family office run by family member Markus Kahlbetzer
7. Angel Syndicates and Angel Groups
A group of individual angel investors who source investments, carry out due diligence and invest together.
Initial Cheque Size Range: $50k - $1m
Initial Investment Stage: Pre-seed and Seed
Subsequent Investment Capacity (Follow-On): Very limited
Mandate: Varies widely, often specialised depending on their investor base.
Ownership Expectations: Low to high (3% - 25%) but unlikely to be able to maintain the % over time
Expectations: Pooling capital from multiple investors for early-stage startups.
Examples:
Scale Investors - Women led startup focus.
Australian Medical Angels - Medical professional investor base focused on healthcare investments.
Ecotone Ventures - Climate focused.
8. Angel Investors
Sub-Types:
Family and Friends
Everyday Angels
Super Angels
Initial Investment Stage: Pre-seed and Seed
Initial Cheque Size Range: $2,500 - $200k
Subsequent Investment Capacity (Follow-On): Very limited
Ownership Expectations: Very low
Investment Preferences and Motivations: It’s important to understand each angel investor’s areas of interest and motivations to invest directly rather than through a venture capital fund.
Others
Other capital sources that are out of scope for this article include grants, accelerators, debt (read my article on startup debt here), CrowdFunding and everyone’s favourite… revenue!
Conclusion
Not every type of investor is right for you and your startup so take some time to stop and reflect on what you and the business requires to achieve your mission and vision and then explore investors that align with this.
Hi - I’m Warwick Donaldson, the author of the Aussie Startup Capital Nerd.
I specialise in providing hands-on capital raising support services for the best Aussie startups (primarily DeepTech).
And I'm always representing the best interests of founders.
Over my career I’ve worked on 150+ startup fundraises, $50 billion in debt deals, founded three companies and have been the early hire at many scaling startups.
Contact me so we can see if it's a fit to discuss the most efficient capital strategy for you!
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