Investment fund manager Benjamin Chong says recent changes to Australia’s venture capital arrangements are encouraging more people to consider investing in high-potential, early stage Australian companies.
Mr Chong, one of three partners at venture capital firm Right Click Capital, says a new 10 per cent tax offset for people investing through early stage venture capital limited partnerships (ESVCLPs) is ‘sweetening’ investment opportunities and attracting new investors.
“Investors can now also receive capital gains tax free status for complying investments made through ESVCLPs, making it a very attractive asset class for investors,” he says. “The tax measures allow new investors to put their toe in the water on a very favourable basis.”
The new venture capital arrangements, introduced as part of the Australian Government’s National Innovation and Science Agenda, also allow venture capital funds to provide more support to innovative companies for longer.
The changes have raised the investment ESVCLP funds can make, from $100 to $200 million, and mean funds no longer need to divest companies once their value exceeds $250 million.
“Becoming a larger fund, making larger investments, allows us to better support more emerging companies,” Mr Chong says. “And not having to divest companies that reach a value of $250 million means we are not forced to sell our stake in a business prematurely … it’s a very helpful measure.”
Encouraging investment in early stage companies
The National Innovation and Science Agenda changes, have sparked a growth in Australian ESVCLPs, and Mr Chong says the changes spurred the establishment of Right Click Capital’s new fund in 2016.
“We saw these changes as an opportunity as they give us the chance to back more early stage companies and appeal to a wider range of investors,” he says.
Right Click Capital backs Australian internet tech start-ups that have the potential to go global. Its investors include high net wealth individuals, family offices and superannuation funds.
“Our fund not only provides money, we also add value, spending time with founders to help them with their company strategy and operation, helping them work out how to expand or best export to international markets,” Mr Chong says.
Right Click Capital’s backing has nurtured the success of several high-profile Australian companies, including hipages, which connects consumers and tradespeople in an online marketplace.
“We've been the key investor in that business over the last couple of years and have seen it grow to be Australia’s largest home services marketplace,” Mr Chong says.
"We’re also very excited to be an early investor in 8i, a 3D imaging and virtual reality start-up, that allows customers to create 3D images and 3D holograms, and which recently scored a $25 million investment from Time Warner.”
Mr Chong says it is rewarding to be part of the growth of these dynamic Australian companies.
“They not only create direct jobs and revenue, they also have a spill-over effect and create jobs and growth in other parts of our economy,” he says.
Visit the Right Click Capital website.
Find out more about how Australian Government venture capital programs work with private venture capital fund managers to provide capital and professional expertise to innovative Australian companies.