OneVentures raising $200m to fill gap left by corporate venture capital funds

A Sydney venture capital fund is raising $200m to back growth stage start-ups and companies, aiming to plug a gap left by corporate investment arms.

OneVentures founding partner Michelle Deaker.

A Sydney venture capital fund is raising $200m to back growth stage start-ups and companies and plug a gap left by corporate investment arms.

OneVentures has announced the launch of its seventh fund, a tech-focused fund that will invest up to $30m into businesses with annual recurring revenue (ARR) of between $5m and $15m.

Founding partner Michelle Deaker said the firm would look to more than triple that ARR for the start-ups it backs and provide “outsized returns” to the fund’s new investors.

Once deployed, the new fund will bring the company’s total funds under management to $1bn, a milestone as it marks its 15-year anniversary.

“I think this fund can actually be what we call a ‘vintage fund’ which is a fund that achieves a high performing outcome,” Dr Deaker said.

“One of the reasons for that is we’ve seen a lot of corrections in the market. Entrepreneurs are much more realistic now and businesses have really become more disciplined because they’ve had to make their cash work harder, so they’re running more efficient businesses.”

Dr Deaker is referring to the highs and lows seen across the industry seen in the pandemic, where cheques were being written overnight at high valuations. Many start-ups and tech companies employed a growth at all cost mentality that eventually led to lay-offs in the tens of thousands locally.

The following year, venture capital funds changed their advice to start-ups, warning them that cash was king and to avoid raising capital at all costs.

At interest rates rose and capital became scarce, those who needed cash were in some cases raising at what’s known as a down round – at a lower valuation.

OneVentures is looking to fill a gap left in the local market by the departure of corporate venture capital funds including Salesforce Ventures.

In January last year, the US tech giant axed its local investment arm, just months after it poured $17m into Australian start-up Reejig, which aims to reduce the hiring and firing of staff.

“We will manage our investments from the US and continue to engage with our 17 portfolio companies and the local start-up and venture capital ecosystem. We will continue to make new and follow-on investments in the Australian market,” a spokesman for Salesforce Ventures told The Australian at the time.

Even the corporate funds that had said they were focused on later-stage companies tended to lean towards early-stage investments, Dr Deaker said.

“Salesforce Ventures was still going pretty early in venture and even then they tended to look at start-ups that were Salesforce-aligned,” she said.

“The big global growth funds – there were a lot that were throwing a lot of money around globally and then they all retreated back to the US.”

Despite the new fund backing later-stage companies, Dr Deaker said there would still be an opportunity for investors to see “upsized” returns.

“You can still achieve the same risk-adjusted returns as venture … typically with lower volatility,” she said. “It can be quite an attractive area to invest actually.”

The fund would attract different investors to those who back VC funds targeting early-stage start-ups, she said. The life cycle of a late-stage fund was typically much shorter, with investors seeing a return within three to five years.