Venture Growth Fund
The Victorian Venture Growth Fund (VGF) supports eligible high-growth startups to access venture credit to scale-up and increase workforce capabilities.
The objectives of the VGF include:
- increasing the level of investment in start-ups.
- upskilling the workforce in Victoria.
- developing new industries; and
- supporting job creation and economic growth.
The VGF is part of the Victorian Government 2020-21 State Budget.
Venture Growth Fund overview
It is expected that the VGF will:
- make loans of between $0.5 million and $5 million on a six to 48 months term (the size may vary depending on fund manager’s parameters).
- charge interest rates that reflect the relatively high-risk nature of startup investments
- make loans that are typically covenant light.
- not require personal director guarantees
The VGF is expected to primarily focus on companies that have the following characteristics:
- are high growth start-ups with a proven product market-fit and scaling revenues
- are growing rapidly
- have a low cash burn rate
- will either be profitable or will have a clear line of sight to profitability
- have strong sustainable underlying unit economics
- have substantial equity base with supportive equity investors (typically Series A onwards)
The fund manager will be responsible for managing the assets of the fund and making all the investment decisions.
All VGF loans will need to meet the Victorian Government’s ESG governance policies.
The fund manager will have strong audit, risk, economic impact, and compliance reporting requirements.
About venture loans
- Venture credit will meet an important need in the Australian startup market.
- It is a relatively new asset class in Australia but has shown great success in the United States, Israel, and Europe.
- Venture credit in the United States, Europe and Israel represents up to 25 per cent on average of later venture capital financings in companies and 10 to 15 per cent of total venture funding.
- Venture loans allow startups to take on debt to fund their company rather than giving away equity in exchange for capital and help them extend their cash runway.
- Unlike conventional debt financing methods, venture credit lenders do not assess the loan based on underlying assets but instead take a holistic assessment of the company and its future potential.
- Typically, start-ups will access venture loans after their first or second rounds of equity funding (Series A onwards).
- OneVentures has been appointed as one of the administrators to deliver the VGF.
- OneVentures is one of Australia’s largest venture capital firms with c.$600 million in funds under management across five funds and 17 co-investment funds.
- In 2018, OneVentures launched a partnership with Viola Group, Israel’s largest technology investment group, to bring venture credit to Australia.
- Viola supports OneVentures in deal screening, structuring, investment decision making and portfolio company reviews.
To apply, read more about the fund here.