Trawling through the Ausindustry website, one will notice that there are only a handful of fully registered early stage venture capital limited partnerships (“ESVCLPs”) with some additional ESVCLPs having been granted conditional registration on the proviso that they do manage to raise the necessary capital. The ESVCLP regime has been introduced four years now, yet the take-up of ESVCLPs has been poor so far in comparison to its predecessor (the Pooled Development Fund regime, now grandfathered, had 126 registered entities at its peak). Is it a matter of bad timing, a lack of funding appetite in an area that is underserviced in the Australian investment landscape or the wrong incentive offerings? Arguably, it is a combination of all the above i.e. the global financial crisis, lack of familiarity by Australian investors with the ESVCLP model, a certain bias towards a unit trust model by the funds management industry and certain regulatory and legal constraints imposed on ESVCLPs.
The ESVCLP regime was introduced by the Australian Government with the aim to attract both domestic and foreign investment flows in risky startups. With a partnership structure, ESVCLPs were seen as the most appropriate vehicle to attract offshore venture capital investors given that the latter would already be familiar with this type of investment structure. However, as alluded above, there has not been a flurry of investors to get the momentum going and increase the level of investment activity in the early stage venture sector.
To read the full, original article click on this link: NewsMaker - Australian Venture Capital: Ready, Steady, False start
