Pre-sub prime snapshot shows venture capital boom

Venture capital and private equity investment in Australian businesses boomed to more than $7 billion in 2006-07, new Australian Bureau of Statistics data released today reveals.

Business received just over $7.2 billion investment from venture capital and private equity funds in 2006-07, up 58% on the year before. Of that amount, $2.3 billion was invested in new projects, a 58% increase on the year before.

The majority of deals were with investee companies established for between two and four years, attracting 41% of funds, while companies in the five to 10 year late expansion category accounted for 29% of deals in 2006-07.

The finance and property sector leapt passed manufacturing to become the single biggest destination for investment, attracting 24% of the 2006-07 total, followed by trade and accommodation and transport and communications.

The amount of money invested in venture capital and private equity was also sharply up by 22% to a total $15.2 billion.

The figures represent a snapshot of a private equity and venture capital investment market that was at its peak in the period immediately before the sub-prime contagion infected global equity and financial markets.

Katharine Woodthorpe, the chief executive of the Australian Venture Capital and Private Equity Association, says the private equity commitment levels in particular are expected to decline in 2007-08.

“On the private equity side, the 2006-07 numbers are skewed by one very large fund,” Woodthorpe says. “We expect to see slightly less growth this year, if only because people are taking longer to invest their funds already raised; they are not rushing out to raise the next fund quite so quickly.”