Australia will see more world-class exits if investors collaborate and share their capital and expertise, Blue Sky Venture Capital investment director Elaine Stead says.
With biotech startup Hatchtech Blue Sky has just seen the first successful exit from its 2012 portfolio, securing a deal worth nearly $280 million.
A whole range of investors contributed capital to the head lice treatment company, including Uniseed, QIC, OneVentures, GBS Ventures and Blue Sky, and Stead says it’s a sign of what can be achieved when these large investors work together.
“When the investors are aligned and add real value to it is better for the sector and it’s better for investors. It’s a win, win, win,” Stead tells StartupSmart.
“Even if we had more depth of capital, I would encourage collaboration – the more smart people around the table the better.”
A successful exit
Hatchtech has reached a commercial agreement with Indian-based Dr Reddy’s Laboratories for upfront and pre-commercialisation payments of $84 million and commercial milestone payments of $193 million.
Blue Sky invested in the Melbourne-based health-tech company in 2013 as part of a $12 million syndicate led by OneVentures.
The technology company offers the only treatment effective in killing both hatched lice and their eggs in a single treatment.
The exit is a great result for everyone involved, Stead says.
“The company executed its strategy perfectly and this is precisely in line with the investment thesis,” she says.
“It’s fantastic. Most importantly it’s a great result for investors, but it’s a wonderful outcome for the Australian venture capital sector.
“It’s an excellent example of what can be achieved with world class research, innovation and management teams and collaborative venture investors.”
The large exits, along with similar ones from the likes of Spinifex and Fibrotech, show that the Australian venture capital market is finally coming into its own, Stead says.
“I think this reinforces the other wonderful commercial partnerships and exits we have seen recently, particularly in the healthcare sector, and demonstrates how investors can benefit significantly from the private equity sector,” she says.
“There are alternatives to the public markets. The challenges is finding the good managers with a track record, and these exits help define this.”
Secrets to commercialisation
A common problem identified in the Australian startup ecosystem is the commercialisation of ideas into successful companies with potential exits. This was something that new Prime Minister Malcolm Turnbull also touched on when announcing the cabinet reshuffle over the weekend.
“One of the things we do not do well at all is the collaboration between primary research, typically in universities, and business. We are actually the second worst in the OECD,” Turnbull said.
“A lot of this is down to changing the culture surrounding this. It’s really important for leaders, PMs, MPs and people in the media to talk about the importance of change, to talk about the importance of science, to talk about the importance of technology.”
Stead agrees, and says this focus on commercialisation and collaboration is crucial in ensuring we see more exits of this size.
“The innovation and commercialisation path is not perfect in Australia and there are still roadblocks,” she says.
“It was still very hard to raise capital for Hatchtech despite its pedigree and opportunity, and others like Spinifex and Atlassian had to raise money offshore to complete their rounds and get the right expertise.
“I think we have built the right platform and infrastructure, now we need to focus on creating more depth – depth of capital, expertise and industry.”
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Denham Sadler is a freelance journalist based in Melbourne.
