Structured as an Early Stage Venture Capital Limited Partnership pending eligibility for a 10 percent tax offset and tax-free returns for investors, the fund is targeting exits in three to five years with health, wellness, and sustainability as central themes.
The fund will cover food tech, MedTech, biotech and digital health, building a diversified portfolio with first access to Gold Coast-based health-tech accelerator LuminaX for its April 2022 cohort of startups, as well as Uniseed, one of Australia’s longest-running venture funds.
The United partnership will allow for passive crowdfunding to co-invest in the deal flow coming out of some of Australia’s leading universities and CSIRO research.
“Things like Cochlear, the cervical cancer vaccines, that’s something that typically investors would never get a chance to participate in at the early stage. Our relationship with Uniseed allows us to co-invest with them alongside their investment in university IP that’s being commercialized,” Maarbani tells Business News Australia.
Tied to the University of Queensland, the University of UNSW, the University of Sydney, the University of Melbourne, and Unisuper, Uniseed has invested in 62 startups to date with $735 million in co-investments and grants, achieving 11 exits.
Meanwhile, LuminaX is backed by the Queensland Government with ambitions to become a center of excellence for health technology and is based in the Gold Coast Health & Knowledge Precinct which is also home to Griffith University, the Gold Coast University Hospital and Gold Coast Private Hospital.
“I am a mentor of this year’s program. I’ll also be delivering the workshops to the cohorts on capital raising and preparing your capital strategy,” Maarbani explains.
“Then our VentureCrowd team will work with them on helping them to prepare for their capital raising strategy, but also the fund will be investing $50,000 in each of them up front.
He clarifies the investment in that cohort will represent just $500,000 of the $10 million, while the portfolio may also include further investments in companies VentureCrowd has already backed such as sugar-free beverage maker Nexba, probiotic drink company PERKii, and digital health app Cardihab.
“We want to deploy the capital within 24 months. Normally a VC (venture capital) fund would take five years to deploy its initial capital and to secure the portfolio; we want to move a lot faster than that because there are so many really strong health and wellness companies that we’re seeing in Australia, and also in Southeast Asia, that we want to take a position on,” Maarbani explains.
“We are thrilled to be the first crowdfunding platform in Australia to offer wholesale investors an opportunity to invest in multiple burgeoning HealthTech ventures at once.
“It represents a real turning point in the venture capital landscape and this is exactly what our investor base expects from us; a seamless way to back purpose-driven projects in a variety of different ways all from the convenience of their mobile phones.”
One example of a successful health-tech exit for VentureCrowd is lung imaging technology company 4DMedical (ASX: 4DX), which delivered a 295 per cent return to its crowdfunding investors in just 18 months when it listed.
That’s not even necessarily a very exciting story in ventures…venture capital investments, when they succeed, can be eight, nine, 20 times the money,” Maarbani says.
“The largest gains in a venture capital portfolio come from a relatively small number of companies, and that’s why the fund has been attractive for people who don’t want to cherry-pick the deals they want to invest in, but just want exposure to everything we see in the health-tech space, the fund allows them to get that broad exposure.”
He says while the reality of venture capital is that not every investment is going to be a massive success story, getting in early certainly has its benefits.
“The reality of venture capital is also that because you invest early, you invest at relatively minor valuations, so when there is a company that goes through growth you get the benefit of significant growth,” he says.
He explains food tech was included in the Health Tech Fund because “innovation in food is critical to our future health and wellness”.
“The production and the manufacture of food, the industrialization of food that’s taken place, there’s very little doubt in our minds that that’s been contributing to rising chronic diseases and putting additional pressure on the planet,” he says.
“From the farm to the plate, we can see foodtech contributing to a more sustainable, transparent and informative food scene and watch it truly become medicine for our bodies again.”
Whilst he is not a vegetarian or vegan himself, Maarbani notes people are moving towards more plant-based diets, and for those who do eat meat they are looking to do so in a way that diverts from damaging industrial practices.
“We’re looking at a company called Our Cow that is not saying don’t eat beef; it’s saying the way beef has been produced right now is not sustainable and not good for you. And here’s another way to do it,” he says.
“If you want to know where your beef is coming from and you want to know that it’s grass-fed and not corn-fed, and you want to know that it’s not pumped full of antibiotics because it’s sitting in an overcrowded feedlot, how do you do it? Normal consumers don’t get that opportunity, so Our Cow have come along and said: ‘What if we remove the middle man, and just aggregate organic, grass-fed beef providers and make that available to consumers?’”
“For us, that’s an example of food technology. It’s not necessarily around scientific intellectual property; it’s more around business process.”
The fund requires a $25,000 minimum investment, which differs from a lot of equity crowdfunding raises that allow for much smaller amounts.
“We think crowdfunding should facilitate investment decisions rather than be a punt, so we want our investors to take seriously the decision to invest in things,” Maarbani explains.
“Whilst we’re a crowdfunding platform, we want people to take the time and think it through and be sure that this is a investment they want to add to their portfolio.
“Who we’re speaking to is the next generation of investor, and those people are Millennials and Gen Zs who are about to inherit the largest intergenerational transfer of wealth in history, and I think we insult their intelligence when we say ‘chuck $50 into it’, because no one is going to take that seriously as an investment opportunity, and I wouldn’t either.”
He says it is interesting how the same access that crowdfunding has given people to invest in businesses such as breweries has evolved to include more sophisticated and diverse assets.