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Navigating the Spectrum of Aussie Startup Investors

Writer's picture: Warwick DonaldsonWarwick Donaldson

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


  1. Traditional Venture Capital (VC)

    1.1 Large VC Funds 1.2 Medium VC Funds 1.3 Small VC Funds

  2. Corporate Venture Capital (CVC)

    2.1 CVC Funds 2.2 CVC Direct Investments

  3. Government Funds

  4. Semi Government Funds

  5. Direct Fund Investments

  6. Family Offices 6.1 Small to Large Offices

    6.2 Single Family

    6.3 Multi-Family

  7. Angel Syndicates and Angel Groups

  8. Angel Investors 8.1 Family and Friends

    8.2 Everyday Angels

    8.3 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.


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

 

Want more Aussie founder cap raising content?

Check out some of my other articles on fundraising..



 

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.


 

Disclaimer: Excentricity Pty Ltd, trading as CapXcentric (ABN 42 679 978 959, AFS Representative No. 001311296) is a Corporate Authorised Representative of True Oak Investments Pty Ltd (ABN 81 002558 956, AFSL 238184). The information provided in this article is intended for companies and startups and is not directed towards investors. Any statements or representations are general information only and do not take into account your personal objectives, financial situation or needs. Readers are advised to have regard to their own circumstances and consider seeking specific advice from a professional adviser before making any business decisions. No representations are made as to the accuracy, completeness, or reliability of any information provided in this article. Readers use the information provided at their own risk.

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Excentricity Pty Ltd, trading as CapXcentric (ABN 42 679 978 959, AFS Representative No. 001311296) is a Corporate Authorised Representative of True Oak Investments Pty Ltd (ABN 81 002558 956, AFSL 238184). Any information about the financial products and financial services available from or through CapXcentric on this website is general information only and does not take into account your personal objectives, financial situation or needs. Please have regard to your own circumstances and consider seeking specific advice from your professional advisers. 

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